2013: Year of the Cloud

Published: September 04, 2013

Cloud ComputingContract Awards

A recently released industry report notes that federal agencies are buying cloud solutions in ever greater amounts. As the total awarded contract value of cloud solutions bought by federal agencies surpasses $16 billion in 2013, it has become clear that federal customers are bellying up to the table to consume industry-provided cloud solutions. Be sure your offerings are on the menu.

Those who sell IT solutions to the federal government can be forgiven if they find themselves confused about the appetite of government agencies for cloud services.  After all, there is a lot of contradictory information floating around out there.  Surf the trade publications on a certain day and one might run across headlines claiming that the federal government’s transition to the cloud has stalled.  Visit those same websites the next day and one might see announcements of huge cloud contract awards, like the Department of Interior’s Foundation Cloud Hosting Services IDIQ contract vehicle with a $10 billion ceiling, or the CIA’s award of a single cloud infrastructure contract to Amazon Web Services for $600 million.  With all of this anecdotal information around, what is one to believe about the actual state of the market?

My own frustration with this situation hit a breaking point about this time last year.  At that time I decided that squishy, data-free conjecture about trends in federal cloud computing just didn’t cut it any longer.  I needed to get to the reality of the situation and establish a baseline of facts from which I could draw my own conclusions about the use of cloud solutions at federal agencies.  So I began the arduous process of collecting data on cloud procurements to understand what feds were buying, how much of it, and from whom.

The results of that research have been appearing in this blog ever since, doled out in dribs and drabs as the limitations of time and space have permitted.  The posts have confirmed to those who read them that feds did not respond to the OMB’s Cloud First mandate just to comply with moving 3 services to the cloud and be done with it.  Instead, federal customers began embracing cloud solutions in 2010 to the tune of awarding nearly $670 million in contracts; and this is only the value of the awarded contracts that I have been able to verify.  As the table below shows, that number grew to just shy of $1 billion in 2011, dipped a tad to $815 million in 2012, and then exploded to almost $16.5 billion in 2013.

Now, we need to keep in mind that we are discussing awarded contract value here, not actual spending on cloud solutions.  Remove Interior’s FCHS award with its $10 billion ceiling value and we are left with a ‘paltry’ $6.5 billion awarded so far in 2013 for cloud solutions.  Even $6.5 billion, however, represents compound annual growth of 182% from 2012 to 2013 in an overall declining federal IT market.  That’s real growth at a time when growth is hard to come by.

But don’t just take my word for it.  Verizon Enterprise Solutions, themselves a big player in the cloud market, just released a report that provides more data to reinforce what I’ve been writing for many moons.  Here are a few data points from their report, which covers the period from January 2012 to June 2013:
  • The use of cloud-based storage increased 90% and cloud-based memory 100%
  • The number of Virtual Machines deployed grew by 35%
  • Enterprises increased their average monthly spend on cloud by 45%
  • Growth in big data will drive cloud adoption
You see, there need not be any lingering confusion about the strength and direction of the federal cloud market.  The public sector’s appetite for cloud solutions has never been greater and I’m betting the house it will continue to grow.  Federal customers are bellying up to the table to consume industry-provided cloud solutions.  Be sure your offerings are on the menu.