New Report: Deltek’s Federal Cloud Market Forecast from Fiscal 2021 to Fiscal 2023

Key Takeaways

• Federal spending on cloud computing grew from $5.8B in FY 2018 to $8B in FY 2020.
• Identifiable cloud spending directly related to COVID-19 totaled $211M.
• Defense spending on cloud is rising faster than spending in the civilian sector.

Faced with aging information technology infrastructure that is increasingly unsecure, and urged by Congress and the White House to control spending while leveraging emerging technologies, federal agencies are turning to commercial cloud solutions as the best method of modernizing their environments.

Federal civilian agencies have led in the use of cloud for the last decade, but defense organizations are now quickly ramping up adoption by increasing their spending on everything from cloud-based capabilities to commercial cloud infrastructure. Demands from telework forced by the COVID-19 public health crisis further highlighted adoption in FY 2020, but the crisis served as both a driver and inhibitor of federal cloud spending. Agencies turned to cloud services to maintain employee productivity and many used the crisis as an opportunity to invest in cloud. Many others built on the cloud capabilities they already possessed, allowing them to pivot easily and inexpensively to full-time telework.

The crisis also diverted the attention of acquisition professionals and redirected the focus to spending COVID stimulus funds. As a result, federal cloud spending rose at a slower pace in Fiscal Year 2020 compared to earlier years. The COVID-19 emergency contributed to federal investment in cloud, therefore, but contrary to some expectations it did not drive it.

Forecasting the Federal Cloud Market

As COVID-related restrictions lift, Deltek anticipates that federal spending on cloud will grow strongly in the next few years due to agencies modernizing IT environments and becoming more comfortable with commercial cloud solutions.

To that end, Deltek forecasts that agency demand for vendor-furnished cloud computing goods and services will grow from $9.2 billion in FY 2021 to $11.4 billion in FY 2023 at a Compound Annual Growth Rate (CAGR) of 10.9%.

Key themes emerging from Deltek's research

Although solid, market growth was slower than expected. Identifiable federal spending on cloud reached a new high of $8B in FY 2020, but the rate of growth slowed compared to previous years due to disruption caused by the COVID-19 crisis.

Cloud adoption uneven from agency to agency. Cloud activity at highly-federated civilian agencies remains concentrated in components that are heavy users, while other components have hardly any use at all.

Defense cloud investment ignores JEDI delays. The Military Departments (MILDEPs) are each taking a centralized approach to cloud adoption by leveraging a small number of enterprise commercial IaaS and PaaS providers. This development has created a de facto dual-cloud ecosystem independent of the Joint Enterprise Defense Infrastructure (JEDI).

IaaS growth slows while SaaS and PaaS investment accelerates. Spending on IaaS is slowing across all of government due to the dominance of a small number of large commercial providers. Investment in SaaS and PaaS is picking up speed.

Government-Wide Acquisition Contracts take center stage. Customers in both the Defense and Civilian sectors prefer using Government-Wide Acquisition Contracts (GWACs) and GSA’s Multiple-Award Schedule (MAS) to acquire cloud services more than any other procurement method.

Deltek's Federal Cloud Computing Market, 2021-2023 report is available now. It offers a 3-year strategic view of the trends, drivers, and challenges shaping federal cloud computing adoption. The report provides insight into the  policies and legislation influencing the cloud market, analyzes agency spending on cloud computing, and identifies opportunities for cloud business development. Spending profiles and forecasts for the top 18 agencies using cloud computing solutions are included, as are recommendations to help contractors evaluate the impact of market trends on their business.