Cloud Computing: Small Business Spending Trends, FY 2020-2022

Increasing the number of contracts awarded to small business has been a goal for successive presidential administrations, and if the spending data is any indication they have been experiencing some success, even when it comes to cloud computing.

According to data collected by Deltek/GovWin’s Federal Market Analysis (FMA) team, spending on contracts awarded to small businesses more than doubled in Fiscal Year 2022.

Total Spending

The chart below shows the data by fiscal year. As we can see, after two years of nearly identical totals, spending on cloud services provided by small businesses exploded in FY 2022. Much higher spending by the Air Force and Homeland Security appears to be the primary impetus behind this increase.

One thing to keep in mind about this data is that it reflects spending on contracts awarded to small businesses. This includes set-asides and sole source agreements. The one piece of data not included is small business awards made via the General Service Administration’s Multiple-Award Schedule. The reason for this is that FMA does not track awards made through the GSA MAS by business size. Thus, the data is useful for seeing the trend, but it does not capture the entire market.

Spending by Business Type

That caveat out of the way, here is the data by small business type.

Not surprisingly, the spending on contracts awarded to generic small businesses (i.e., not in a socioeconomic sub-group) dwarfs that spent with all socioeconomic sub-groups combined. This spending totaled $166M in FY 2020 and reached $515M in FY 2022.

Spending also rose for 8(a) Small Businesses, growing from $126M in FY 2020 to $167M in FY 2022. Spending with HUBZone Small Businesses rose the most, from a measly $476K in FY 2020 to $14.5M in FY 2022. Somewhat surprisingly, spending with Service-Disabled Veteran-Owned Small Businesses actually fell from $11M recorded in FY 2020 to $8.4M in FY 2022. Likewise, over that same span of time, spending with Woman-Owned Small Businesses fell from $4.4M to $4.0M.

Spending by Department

Which departments spent the most with small businesses on cloud contracts? Here is the data for that statistic. I’ve only included the top ten departments.

Clearly, the Air Force and Homeland Security are doing something right. The overwhelming bulk of their spending, however, was with generic small businesses. Defense Agencies reported a similar pattern, with generic small business spending rising from $20M to $36M over the three year span. The Fourth Estate balanced this out, however, by spending $24M with 8(a) businesses in FY 2022. This is after spending $16.6M with them in in FY 2020.

Concluding Thoughts

Wrapping up, there are some fluctuations in the spending with small businesses by federal agencies, but the overall trend is up. The rise in spending with HUBZone businesses is encouraging as it shows more entrepreneurs from under-represented groups becoming involved in the market. Conversely, weak spending with veteran-owned small businesses is of concern and should be remedied wherever possible.

Analyst Note - This is a repost of a draft article posted in error with limited data on June 7. This version contains the complete data.