Federal Cloud Contract Awards Strong in Fiscal 2015

Published: May 27, 2015

Cloud Computing

Through the first three quarters of the fiscal year, federal agencies have awarded contracts for cloud services valued at more than $1 billion, indicating that FY 2015 will be a strong year for cloud adoption.

We often hear that the adoption of cloud computing by federal agencies is lagging. Choose whatever adjective you’d like to denote sluggishness or reluctance and you’ll see it applied to the federal cloud market in one place or another. Rarely, however, does one hear if available data bears out this conclusion. Agencies themselves estimate that they will spend more than $2 billion on cloud computing in fiscal 2015. Admittedly, this is only 2.64% of the $75.6 billion that agencies estimate they will spend on information technology, but it is up from the $1.58 billion that agencies said they spent on cloud in fiscal 2014. In today’s tightening economy, $400 million is nothing to sneeze at.

So, there is growth in agency spending on cloud. Contract award data also bears out growth in the cloud market. We can see this when comparing the total value of cloud contracts awarded in the first two quarters of fiscal years 2013, 2014, and 2015.

Notice the huge rise in awarded contract values in the first quarter of fiscal 2015. This growth is largely attributable to the award of the Defense Information Systems Agency’s Enterprise Storage Solutions II contract, which calls for a hybrid cloud data storage service, with vendors supplying hardware housed in the agency’s data centers.  DISA will use this hybrid private cloud to store sensitive data while the commercial cloud portion of the infrastructure will store unclassified data. When the value of other contracts awarded by Defense customers is added to this total, it comes to $563 million, making the DoD the leader among all federal agencies when it comes to the total value of cloud contracts awarded in Q1 of fiscal 2015. Ironic, isn’t it, considering the impression in the market that the DoD is dragging its feet when it comes to the cloud?

The second observation to be made is the total value of the awards. In Q1-Q2 of fiscal 2013, the total awarded value came to $797 million. That figure dropped to $125 million over the same period in fiscal 2014, but returned to 2013 levels in the first half of FY 2015 with a total awarded contract value of $794 million. If typical federal procurement patterns hold, the total value of cloud contracts awarded in the second half of FY 2015 should be significant, as the latter half of the fiscal year usually sees the most contract activity. In fiscal 2013, 96% of overall total contract value was awarded in Q3 and Q4. In fiscal 2014, the number dropped to 44%, which is still a considerable portion of the market, but so far in FY 2015, the total value of cloud contracts awarded in Q3 is $238 million with one full month left to go.

Summing up, we can say based on contract award data that fiscal 2015 has already been and will continue to be a strong year for federal agency cloud adoption. It will certainly be better than fiscal 2014, but might not approach the high total value of contracts awarded in fiscal 2013 because that year saw the award of several very large contract vehicles with ceilings in the billions. Spending on these contracts is another story, to be sure, as total awarded value doesn’t promise that agencies are putting budget dollars through these awards. Nevertheless, the value of the awards is a useful metric and so far, that metric says federal cloud adoption is coming along nicely.