FY 2020-2022 Spending on Cloud Computing at the U.S. Department of Commerce

Recent data on the federal cloud computing market continues to generate excitement. With identifiable federal spending on cloud breaching $10B in FY 2021 one can be excused for assuming that the market will continue to grow by double digits for the foreseeable future. This may be true in a larger sense, but it is not true across the board. Spending on cloud goods and services at the Department of Commerce is a case in point. After hitting a high in fiscal year 2020, Commerce’s spending on cloud is not only dropping, the decline is accelerating.

Total Cloud Spending

Identifiable spending on cloud at Commerce fell to $448M in FY 2022, shrinking by 22% compared to FY 2021 and by a whopping 36% compared to FY 2020.

What gives? Initially, I suspected the end of the 2020 Census effort was probably behind the decline. The decennial census is, after all, a massive effort that required the U.S. Census Bureau to invest a lot in cloud-based computing resources. The data tells a different story. Cloud spending is either declining or experiencing a type of roller coaster effect across several Commerce components that use it the most.

Take the Economics and Statistics Administration (ESA) as an example. The ESA spent $282M on cloud in FY 2020. That total dropped to $145M in FY 2021 and then again to $38M in FY 2022. Cloud spending at the U.S. Patent and Trademark Office (USPTO) notched a similar decline. After spending $188M in FY 2020, the USPTO spent $83M on cloud in FY 2022. The National Oceanic and Atmospheric Administration (NOAA), meanwhile, reported its FY 2022 cloud spending as $222M. This was higher than the $159M NOAA spent in FY 2020, but in FY 2021 it spent $321M.

What Is Happening?

One answer to the question why spending is dropping has to do with the various levels of activity at different components. NOAA increasingly relies on commercial cloud resources to augment its High Performance Computing capabilities for scientific research. The science of weather forecasting never takes a break and so NOAA’s spending remains stronger in general than at other agencies with less stringent requirements or with efforts underway that use more resources in one quarter before needing fewer resources in the quarters that follow.

Another answer to the conundrum of falling spending is maturity. It can be argued that several of Commerce’s components jumped into the cloud with both feet in FY 2020, and as everyone knows the cost of leveraging a new technology tend to be higher at the outset. This trend is obvious in Commerce’s spending on cloud engineering. Federal Market Analysis defines this category of the market as any effort requiring the engineering of a legacy system for the cloud or which is focused on implementing a new system. Development Security Operations and other cloud-based software development are also included in the category.

Commerce’s spending on cloud engineering peaked at $238M in FY 2020 and has fallen each year since. In FY 2022 it totaled $75M.

In other words, Commerce components made a big push in FY 2020 and their efforts have slacked off since then. This leaves spending on cloud capabilities, which achieved a stable level of $268M in FY 2021 and rose modestly to $276M in FY 2022. This analyst does not doubt that spending on cloud engineering will pick up again at Commerce as departmental components tackle more complex legacy systems. They just aren’t there yet.