Federal Cloud Spending, FY 2020-2022

Back in fiscal 2010, then Federal Chief Information Officer Vivek Kundra estimated that approximately $20B worth of the federal government’s annual information technology (IT) spending could someday be redirected from legacy systems to cloud computing. Mr. Kundra’s forecast hasn’t yet come to pass, but with federal IT spending now significantly higher than the estimated total of $76B back in his day total identifiable agency spending on cloud computing has reached a point more than halfway to his target.

Total Cloud Spending

The latest data compiled by Deltek’s Federal Market Analysis team shows that in fiscal year (FY) 2022 the federal government spent a total of $12.3B on cloud goods and services. This represents approximately $2.3B more than the government spent in FY 2021 and translates into a compound annual growth rate (CAGR) of 15% from FY 2020 to FY 2022.

Regular readers of this blog might recall that last year Deltek FMA identified about $10.7B in cloud spending for FY 2021. So, where did roughly $700M go since then? The answer is revisions to federal spending reported by contracting officers. Adjustments to contract spending are made regularly, meaning that the totals we identify here at FMA change by the time we get to compiling the next year’s numbers. The data is basically a living thing and, like all living things, the numbers change. The good news is that even with the adjustments, the total for FY 2022 came in much higher than in FY 2021.

Cloud Spending by Service Delivery

The federal cloud business is booming, particularly for those providing capabilities delivered as Software-as-a-Service (SaaS).

As the chart above shows, identifiable spending on SaaS capabilities rose by approximately $1.0B in one fiscal year. Some of this rise is attributable to Deltek capturing more solutions being procured. Most of it, however, is organic growth in the market.

Spending on Platform-as-a-Service (PaaS) also rose more than $450M in that one year span, as did spending on Network-as-a-Service (NaaS) solutions, which grew by a total of $67M. The one area that saw no growth is Infrastructure-as-a-Service (IaaS). This further confirms a trend Deltek FMA observed two years ago, but confirmed last fiscal year, namely, that the IaaS market is largely locked up by a small number of large commodity service providers.

Cloud Spending by Deployment Model

FMA tracks spending on five different cloud deployment models. This data for FY 2020 through FY 2022 is shown below.

Identifying the deployment model being used can be tricky or, in many cases, impossible. This is why FMA includes an “Unknown” category. For the other deployment models listed we can see that spending increased on all types but Private cloud. Community cloud has become the most popular model used, followed by Hybrid and Public cloud.

Final Thoughts

Last August, FMA forecast the federal cloud market would reach $14.5B in total spending for FY 2022. We rebaselined our forecast significantly higher at that time to account for an unexpected surge in spending in the previous year. After identifying $12.3B in spending for FY 2022 we are satisfied that our forecast remains reasonable. This is because we understand that our data does not capture the entire market. Millions of dollars spent on cloud requirements are reported under program names or other innocuous terms that do not enable us to verify that the work is cloud related. Keeping this in mind, FMA forecast that federal cloud spending in FY 2023 will total $16.5B. We think this remains a reasonable estimate given the growth seen from FY 2021 to FY 2022.