Federal Cloud Computing Market, 2021-2023

Published: June 08, 2021

FeaturedFederal Market AnalysisCloud ComputingForecasts and Spending

Deltek’s Federal Cloud Computing Market, 2021-2023 report explores key policy, acquisition and spending trends that are shaping the federal cloud computing market.

The COVID-19 pandemic served as both a driver and inhibitor of federal cloud spending. Facing unprecedented disruption from the public health emergency, federal agencies turned to cloud services to maintain employee productivity. Many agencies used the crisis as an opportunity to invest in cloud, many others built on the cloud capabilities they already possessed, allowing them to pivot easily and inexpensively to full-time telework. However, the pandemic also diverted the attention of acquisition professionals and redirected focus to spending COVID stimulus funds. As a result, federal cloud spending rose at a slower pace in Fiscal Year 2020 compared to earlier years. The COVID-19 emergency contributed to federal investment in cloud, therefore, but contrary to some expectations it did not drive it.

Agencies in the Civilian sector are already years into cloud adoption, which contributed to the maturity of the Infrastructure-as-a-Service (IaaS) part of the market and dominance of a small number of large commercial providers. In contrast, investment in Software-as-a-Service (SaaS) and especially Platform-as-a-Service (PaaS) continues to accelerate as agencies expand their use of cloud-based capabilities and turn to the new technology. The shift to SaaS and PaaS is slower, but also visible at the Department of Defense, which is rapidly catching up to the other sectors of the market.

There are a number of additional factors driving agency adoption, such as the pressing need to improve cybersecurity; a desire to leverage emerging technologies (such as artificial intelligence) on cloud platforms; the ongoing success of the Office of Management and Budget’s Cloud Smart policy; the growing availability of FedRAMP-certified solutions available to agency customers; and the $1B in funds appropriated to GSA’s Technology Modernization Fund (TMF).

Deltek forecasts that agency demand for vendor-furnished cloud computing goods and services will grow from $9.2 billion in FY 2021 to $11.4 billion in FY 2023 at a Compound Annual Growth Rate (CAGR) of 10.9%.

Changes to Deltek’s Cloud Market Forecast Due to COVID-19

Due to the unique circumstances of the COVID-19 pandemic, including the uncertainty of its impact on future federal budgets and operations, FMA has retained its narrowed its forecast focus to “near term,” covering only FY 2021–2023.

Key Findings

  • Although Solid, Market Growth Slower than Expected. Identifiable federal spending on cloud reached a new high of $8B in FY 2020, but the rate of growth slowed compared to previous years due to disruption caused by the COVID-19 crisis.
  • Cloud Adoption Uneven from Agency to Agency. Cloud activity at highly-federated civilian agencies remains concentrated in components that are heavy users, while other components have hardly any use at all.
  • Defense Cloud Investment Progresses Despite JEDI Delays. The Military Departments (MILDEPs) are each taking a centralized approach to cloud adoption by leveraging a small number of enterprise commercial IaaS and PaaS providers. This development has created a de facto dual-cloud ecosystem independent of the Joint Enterprise Defense Infrastructure (JEDI).
  • IaaS Growth Slows While SaaS and PaaS Investment Accelerates. Spending on IaaS is slowing across all of government due to the dominance of a small number of large commercial providers. Investment in SaaS and PaaS is picking up speed.
  • Government-Wide Acquisition Contracts Take Center Stage. Customers in both the Defense and Civilian sectors prefer using Government-Wide Acquisition Contracts (GWACs) and GSA’s Multiple-Award Schedule (MAS) to acquire cloud services more than any other procurement method.
  • Critical Insight for Vendors

    Deltek’s Federal Cloud Computing Market, 2021-2023 report takes a strategic 3-year view of the market factors shaping federal acquisition and use of commercial cloud computing services.

    The report provides:

  • Insight into the factors, policies, and strategies shaping the cloud market.
  • Analysis of the dynamics shaping agency spending on cloud computing.
  • Identification of opportunities for cloud business development.
  • Spending profiles and forecasts for the top 18 agencies using cloud computing solutions.
  • Recommendations to help contractors evaluate the impact of trends on their business.
  • Deltek's Federal Cloud Computing Market, 2021-2023 report is delivered in PowerPoint® format, including a PowerPoint® Executive Summary, and an Excel® data workbook.

    Table of Contents

    Federal Cloud Computing Market, 2021-2023

    Introduction

  • Purpose of the Report
  • Deltek’s Cloud Spending Methodology
  • Key Findings
  • Market Analysis

    Budget Environment

    Market Trends and Drivers

    Cloud Computing Spending Trends

    Competitive Landscape

    Deltek’s Cloud Computing Market Forecasts

    Agency Analysis

  • Air Force
  • Army
  • Navy
  • Defense
  • Health and Human Services
  • Veterans Affairs
  • Commerce
  • Agriculture
  • Treasury
  • Homeland Security
  • General Services Administration
  • State
  • Justice
  • Social Security Administration
  • NASA
  • Energy
  • Interior
  • Labor
  • Conclusions and Recommendations