Federal Cloud Computing Market Outlook is Strong
Published: September 04, 2019
Agencies are looking to cloud computing to meet numerous strategic and operational goals, which will drive healthy spending in the coming years.
Pressure from the White House and Congress on agencies to leverage modern commercial capabilities and divest expensive legacy IT infrastructure is growing, and agencies are developing more aggressive strategies for cloud adoption. This and other key drivers are among the findings in our recent report – Federal Priorities Spotlight: Cloud Computing, 2019-2024, which explores key policy, acquisition, and spending trends that are shaping the federal cloud computing market.
The benefits of cloud computing – cost savings, improved cybersecurity, enhanced mission efficiency and operational effectiveness, and improved citizen service delivery – make its implementation central to federal IT modernization.
New cloud-focused working capital funds are addressing funding challenges, while streamlined Trusted Internet Connections (TIC) alleviate technical network challenges. Agency employees are also being trained to manage cloud technology, and new acquisition vehicles are rolling out to enable more efficient procurement.
Civilian sector budgets remain under pressure, which is helping to drive cloud investment as agencies are forced to replace expensive legacy infrastructure. The Department of Defense is in a stronger fiscal position, but it too is looking to reduce costs. Additional drivers of cloud adoption include the need to improve cybersecurity and a desire to leverage artificial intelligence and machine learning on cloud platforms. The convergence of alternative funding models, best practices and implementation guidance sets the groundwork for increasing the pace of cloud computing adoption.
Key findings in the report include:
- Competitive Market. Traditional contractors remain competitive in the federal marketplace despite the in-roads being made by large commodity providers. Agency reliance on contractors for engineering expertise is a major factor.
- IaaS Still Dominant. Spending on Infrastructure-as-a-Service continues to lead the market, but Software-as-a-Service continues its growth. Platform-as-a-Service spending remains slow by comparison.
- Cloud Key to Agency Modernization. Cloud adoption is driving the modernization and optimization of federal networks, prompting some agencies to adopt emerging technologies such as software-defined networking.
- Growing Complexity Benefits Contractors. Multi-cloud environments are making industry partners indispensable for integration and management services. This will continue for as long as agencies lack in-house expertise and automated solutions.
- Trusted Cloud Solutions. FedRAMP certification is now mandatory to be competitive. Agencies also appear to be requesting higher certification levels than some tasks require.
- Secure Network Connections. Revised Trusted Internet Connections (TIC) policy should remove roadblocks to cloud adoption. There is no one-size fits all solution yet; agencies are choosing solutions tailored to their own needs.
In light of our analysis, Deltek forecasts that agency demand for vendor-furnished cloud computing goods and services will grow from $5.3 billion in FY 2019 to $9.1 billion in FY 2024 at a Compound Annual Growth Rate (CAGR) of 9.6%.
Read the full report: Federal Priorities Spotlight: Cloud Computing, 2019-2024 to get a strategic five-year view of the market factors shaping federal procurement of commercial cloud computing services.