Fiscal 2019-2021 Federal Cloud Market Spending and Contract Award Trends

Key Takeaways

• Federal cloud spending in FY 2021 nearly reached $11B.
• The total value of cloud contracts awarded by federal agencies in FY 2021 was $23.3B.
• Civilian agencies continued to spend the most on cloud, but DOD’s spending is rising rapidly.

Fiscal Year 2021 proved to be the year that identifiable federal spending on cloud computing finally breached $10B. Spending increased so much compared to fiscal 2020, in fact, that cloud obligations reached $10.8B altogether. Readers should keep in mind that this figure is for cloud efforts that Federal Market Analysis can identify. Agencies spend millions more on cloud-related work via contracts that include other types of tasks as well.

The other metric Federal Market Analysis watches is the Total Awarded Contract Value (TCV). This data tracks agreements signed by agencies with industry for cloud solutions and services. TCV also skyrocketed, but one year earlier in FY 2020. TCV is useful as an indicator of where the market is heading since spending on awarded contracts typically manifests for the next several years.

Cloud Spending by Market Sector, FY 2019-2021

The chart below shows cloud spending across the multiple sectors of the federal market – Civilian, Defense, and Independent (i.e., non-Cabinet) agencies.

As it has since the start of federal cloud investment, spending by Civilian agencies continued to dominate the market, growing 34.5% from FY 2019 to FY 2021. Defense spending on cloud is quickly catching up, however, rising 42% over that same period. Spending by the DOD on cloud solutions grew particularly strongly in FY 2020, rising by more than $1B from the total spent in FY 2019.  Spending by independent agencies, meanwhile, grew by 194% from FY 2019, but with the overall total reached being much lower than either the Defense or Civilian sectors.

Cloud TCV by Market Sector, FY 2019-2021

The data for TCV shows much the same picture as far as the market’s upward trajectory is concerned, but with some slight differences across sectors.

Concerning Civilian cloud contracting, the TCV grew by 203% from FY 2019 to 2021. Cloud TCV had been growing strongly even before FY 2021, but the leap from FY 2020 to FY 2021 effectively doubled Civilian TCV, a result that is both dramatic and indicative of the resources going toward cloud adoption.

The trend at DOD is even more impressive, with TCV rising 150% over the three year period. The difference here is the rise from FY 2019 to 2020 when the total cloud TCV for DOD effectively tripled. It is likely not a coincidence that this occurred in FY 2020 as the delays facing the Joint Enterprise Defense Infrastructure (JEDI) effort forced Defense customers interested in using cloud to award contracts for other solutions.

The cloud TCV for independent agencies, in the meantime, also rose by 75% to $749M altogether.

Bottom Line

Overall, the numbers send a clear message. After years of waiting for this market to mature its time has come. Federal contracting for cloud computing, as measured by both spending and TCV, is booming.