Federal Cloud Computing Market, 2024-2028

Reaching a new high of $16.5B in FY 2023, spending in the federal cloud computing market is rising faster than ever.

While it has become increasingly common for federal agencies to use cloud-based services, the growing adoption of Software-as-a-Service (SaaS) is generating concerns about the security of government data in the cloud. This is leading agencies to leverage FedRAMP-approved capabilities more often and to scrutinize service level agreements for adequate data protection measures. Mandates from the White House, and growing attention from Congress, meanwhile, are pushing agencies to invest in cloud-based security capabilities as part of the government-wide transition to zero trust.   

The transition to a market largely driven by the consumption of SaaS is greatly benefitting small businesses. In FY 2021, small businesses earned only 5% of federal spending on cloud. By FY 2023, this total had grown to nearly 21% of cloud-related obligations. Large businesses continue to dominate in the provision of Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS), capturing 78% and 70% of federal spending, respectively, in FY 2023.

Migrating legacy systems to the cloud or replacing them with modern cloud native capabilities continues to be the preferred way for agencies to modernize their IT environments and to introduce the latest cybersecurity measures.   

Deltek projects growth in agency demand for vendor-furnished cloud computing goods and services from $21.8 billion in FY 2024 to $30.3 billion in FY 2028.

Key Findings

• Defense Cloud Adoption Outpaces Civilian Sector. Driven by a combination of growing comfort with the technology, policy mandates and stability provided by the award of the Joint Warfighting Cloud Capability (JWCC) contracts, spending on cloud computing grew faster across the DOD than in the federal civilian sector from FY 2021 to 2023.
• Market Bifurcation. A handful of large cloud service providers dominates the delivery of Infrastructure-as-a-Service and Platform-as-a-Service, leaving the delivery of Software-as-a-Service as the part of the market that is most competitive for small businesses and new market entrants.
• Small Businesses Gain Ground. Although large and mid-sized businesses continue to dominate the market, agencies nearly tripled spending on cloud capabilities and services provided by small businesses from FY 2022 to FY 2023.
• Sole Source Contracting Rises. The use of sole source contracts across all sectors of the federal government rose by 55% from FY 2022 to FY 2023. Sole source contract use is growing slightly more aggressively in the DOD as opposed to the civilian sector.
• Securing Data Becomes Paramount. Rising cyber threats are driving agencies to ramp up spending on cloud-based security and leverage more FedRAMP-approved solutions. Failing cloud security FITARA scores may also pressure agencies to increase administrative scrutiny over cloud contracts and/or add security-focused service level agreements.

Critical Insight for Vendors

Deltek’s Federal Cloud Computing Market, 2024-2028 report provides insight into key policy, acquisition and spending trends that are shaping the federal cloud computing market.

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.
• Database of identified federal cloud computing efforts
• 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, 2024-2028 report is delivered in PowerPoint® format, including a PowerPoint® Executive Summary and an Excel® data workbook.