Forecasting Federal Cloud Computing, 2014-2019: The Market Keeps Growing

When assessing the state of federal cloud computing, Deltek’s Federal Industry Analysis team sees 7 major trends shaping cloud investments across most government agencies:

• Data Governance/Management – Agencies lack policies and oversight processes to govern the hosting and use of their data in commercial cloud environments.
• Security Concerns – There is a lack of consistency in agencies ensuring that commercial clouds are FISMA-compliant. Furthermore, FedRAMP certification is taking an average of 9 months, while receiving an agency authority to operate (ATO) takes only 4.
• Investment Management – Agencies lack the tools and oversight processes necessary to manage their cloud investments, determine costs, and calculate ROI.
• Shared Services – As part of evolving common operating environments, agencies are taking a hard look at the cloud as a solution for reaching shared services goals on both inter- and intra-agency levels.
• Mission Complexity – Agencies with complex and classified missions are finding that different types of missions require different types of clouds solutions and configurations.
• DOD Loosens the Reins – In an act anticipated to greatly increase cloud spending, acting DoD CIO Terry Halvorsen has revised DoD policy to allow the military departments to procure cloud solutions on their own vs. exclusively through the Defense Information Systems Agency.
• NIST Charts Roadmap Forward – In October 2014, the National Institute of Standards and Technology released its long-awaited US Government Cloud Computing Roadmap, recommending standards that will impact agency cloud procurement.

Taking these drivers into consideration, Deltek forecasts the federal agency demand for vendor-provided cloud computing services will increase from $2.45 billion in FY 2014 to $6.5 billion in 2019 at a compound annual growth rate (CAGR) of 21%. (See chart below.)

 

Key Findings

FIA’s research reveals a number of important conclusions concerning how agencies are handling the transition to cloud solutions:

• Cloud spending in the Civilian buyer segment continues to accelerate, but recent Inspector General audit findings have shown that Civilian agencies have been moving to the cloud more aggressively than has been reported and than they are prepared for.
• Defense spending on and contract awards for cloud computing peaked in fiscal 2012. This spending has declined since the DoD CIO’s enterprise Cloud Computing Strategy was released.
• Generally speaking, DoD spending on cloud has focused primarily on making defense systems cloud ready.
• Investment in Platform-as-a-Service continues to significantly lag behind IaaS and SaaS.
• Multiple award contracts and contract vehicles like Alliant continue to be the most popular methods of procuring cloud services.

All in all, the purchase of commercial cloud services by federal agency customers continues to evolve slowly, but surely. Nevertheless, several trends implying challenges with cloud adoption are expected to hamper rapid growth through fiscal 2016.  Come fiscal 2017, however, agency spending on cloud is expected to rise considerably.

Learn more of our perspective in our latest report: Federal Update: Cloud, Data Center, Big Data, and Mobility, 2014-2019.

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