FY 2020-2022 Army Cloud Spending

Most of us assume that with the arrival of a new technology spending will increase as federal agencies grow more comfortable with it and establish ways to procure solutions. For years now this has been the case with the federal cloud market. Spending has risen annually even though it remains uneven across agencies and market sectors (i.e., civilian, defense, intel). Spending at agencies such as the Department of Commerce provides a good example. In the years leading up to 2020 the U.S. Census Bureau ramped up spending on the cloud services it needed to support the decennial census effort. Then, as that year arrived, and all of the pieces had been put into place, spending declined precipitously.

This reveals another truth about agency spending in the federal cloud market. It has a certain cyclicality to it based on the needs of the agency in question and the projects they have that are leveraging cloud. Such is the case with the U.S. Army’s adoption of cloud services. The recent departure of high-profile advocates such as Paul Puckett and Raj Iyer raised the public visibility of the Army’s journey to the cloud, giving the impression that cloud spending is accelerating. Unfortunately, this is not the case. As the chart below shows, Army’s cloud spending peaked in FY 2020 and has declined annually ever since.

One word can be used to explain why this is happening – cyclicality. When agencies invest in building out new capabilities or engineering legacy systems the expenditure rises early on in the work. After the initial investment is complete spending drops to a lower “new normal.” That’s cyclicality.

In FY 2020, the Army spent $898M on its top 20 cloud projects. Spending on these same projects dropped to $441M in FY 2021 and $329M in FY 2022. Some of these projects are high profile. For example, take the Army Vantage program. A cloud-based enterprise-level data platform that is the centerpiece of the Army’s digital transformation effort, the Vantage program spent $111M to stand-up the capability in FY 2020. By FY 2022, spending on the main contract supporting Vantage totaled only $116K.

Cyclicality is also obvious in the data when it is broken down by market category. From FY 2020 to 2022, Army customers spent almost $1.7B on cloud engineering. The Federal Market Analysis team here ay GovWin defines engineering as any work done to build new systems or engineer legacy systems for the cloud. This category of work includes system engineering, software development, cloud integration, and operations and maintenance, among other categories. In FY 2020, the Army’s spending on cloud engineering hit $812M. By FY 2022, it dropped to $366M.

Cloud spending cycles make the timing of industry bid and proposal efforts tricky. The important thing about the market to remember is that agency spending is unlikely to rise like a hockey stick. It will ebb and flow as agencies invest in cloud-related work when it is necessary. Accordingly, this analyst expects Army’s cloud spending to begin rising again when the Service’s Enterprise Application Migration and Modernization (EAMM) rolls out later this year and provides Army customers with a contract vehicle for moving capabilities to the cloud.