MA

Cloud Computing is Where the Money is Going

Published: February 06, 2013

Cloud ComputingForecasts and Spending

Tough times in the federal IT market are forcing industry to dig deeper to uncover areas of opportunity. Cloud computing is one such area as federal spending on cloud based solutions rises annually by double digit percentages.

Fans of Charles Dickens will recall the opening lines of A Tale of Two Cities.  “It was the best of times, it was the worst of times,” Dickens wrote. Few of us, however, will recall another part of that long opening sentence, “we had everything before us, we had nothing before us.” To me, these clauses capture the essence of today’s Federal IT market. Those of us observing the market see the promise of major, necessary areas of IT investment before us, including cloud computing, big data, network consolidation, and mobility. And yet with no federal budget in the last four years and a gridlocked Congress at odds with the Executive Branch, the IT industry has nothing before it except Continuing Resolutions, halted projects, and reduced program funding.
We live in an age of uncertainty. It is this instability that Dickens captured in his famous novel, as the world of his time careened from an old paradigm into a new age of revolutionary upheaval. We too are at the dawning of such an age and now, as then, times of great change are also opening areas of great opportunity. So where might this opportunity be found in Federal IT today?
How about in cloud computing? Table 1 below shows the trajectory of total awarded contract values related to cloud computing since January 2010. Please note the word "related." Cloud computing can sometimes be listed as a line item requirement in some of these efforts, meaning that only a certain percentage of work is actually cloud-related. The data behind this chart has been diligently compiled over the last year, but these totals include only verified contract awards. The number (and therefore the total value) of cloud contracts awarded across the federal government is actually much higher than the totals reflected here. Locating this data is not always possible so I have included the data I have been able to find so far.
As Table 1 shows, federal agencies have awarded approximately $1.15 billion worth of contracts related to cloud computing in the last 3 years and 1 month. Take a look at the 431% leap in total awarded contract value from 2010 to 2011. Striking, isn’t it? This was followed by a more modest, but still quite impressive leap of 89% in total awarded contract value from 2011 to 2012. Keep in mind that these are calendar year numbers (January 2010 to January 2013) and that this look at the data is preliminary. Even incomplete, however, this data set illustrates a clear trend – cloud procurements are where Federal IT contract dollars are going.
 
Table 1: Total Awarded Cloud Contract Value, CY 2010-2013
Table 2 provides another look at the data, this time dividing federal cloud spending by the top ten NAICS Codes. The total value represented here is $964 million over the same time span. There are discrepancies between the data in the two tables because a NAICS Code could not be determined for every awarded contract. Regardless of this fact we can see that 518210: Data Processing, Hosting, and Related Services is by far and away the most popular NAICS under which cloud contracts have been competed, followed by 541512: Computer Systems Design Services, and 541519: Other Computer Related Services, respectively.
 
Table 2: Awarded Cloud Contract Value by NAICS, CY 2010-2013
This preliminary look at data on the federal cloud marketplace speaks for itself.  If your business is not in cloud, it is missing out on an area of tremendous growth. I will periodically revisit this subject in 2013 and in October of this year FIA will provide a much deeper analysis of the data in an updated report on federal cloud investments. Returning to Dickens, he also wrote of a season of light and a new spring of hope. We would do well to remember this, if only to remind ourselves that even in a time of great change, uncertainty can also bring great opportunity.