Observations on the New Department of Defense FY 2022 Cloud Budget

Published: June 30, 2021

Federal Market AnalysisCloud ComputingDEFENSEForecasts and SpendingInformation Technology

The Department of Defense forecasts spending $798M on cloud in fiscal 2022.

Key Takeaways

  • DOD anticipates the Navy and 4th Estate will spend the most on cloud in FY 2022.
  • Most of the DOD’s cloud spending falls under Operations and Management.
  • The cloud spending and budget forecast numbers provided by the DOD in FY 2021 diverge significantly from the number provided for FY 2022.

Last week the Department of Defense (DOD) released its Information Technology and Cyberspace Activities Budget Overview for Fiscal Year 2022. Listed in this document is data formerly released as part of the annual DOD Congressional Cloud Report. This report used to provide insight into the composition of the DOD’s cloud portfolio, including data on the commercial partners the DOD has engaged for cloud services. This year’s cloud data, in keeping with trends emerging over the last several years, severely curtails details provided in previous year’s reports. Despite the lack of data provided, this year’s IT Overview does present some proposed spending numbers that will be of interest.

Forecast Cloud Spending by Defense Component

The data shown below breaks out proposed cloud spending and past years by defense component. Showing a total of $798M in planned cloud investment in FY 2022, the data shows the fastest growth in cloud consumption by the Department of the Navy and across the combined agencies of the 4th Estate.

Additional details that can be gleaned from the submitted data are as follows:

The DOD estimates it will spend approximately $100M more in FY 2022 than it estimated for FY 2021.
Most of the FY 2022 cloud budget estimate falls under Operations and Maintenance ($357.4M), while the proposed cloud budgets under Research, Development, Test, and Evaluation (RDT&E) total $238.6M.
DOD estimated in FY 2020 that $189M of its cloud budget fell under the Defense Working Capital Fund (DWCF). It estimates this total will be exactly the same for FY 2022.

Broken out by defense component, FY 2022 proposed cloud spending falls across several funding buckets:

  • Army – O&M ($18M) and RDT&E ($593K)
  • Navy – RDT&E ($224M), O&M ($38M), Procurement ($6M) and DWCF ($5M)
  • Air Force – O&M ($219M), DWCF ($8M), MILPERS ($3M), RDT&E ($3M) and Procurement ($1M)
  • Defense-Wide – DWCF ($176M), O&M ($82M), RDT&E ($11M) and Procurement ($1M)

Spending on Commercial vs. In-House Cloud

This year’s data show that the DOD has committed fully to leveraging commercial cloud vs. on premise in-house data centers.

Caveats

Comparing FY 2021’s data below with this year’s data leads to the conclusion that one should take the reported numbers with a grain of salt. Estimated FY 2021 spending by every defense component diverges significantly from the data reported in FY 2022, suggesting that the DOD still has not found a reliable way to report, or even estimate, its cloud budgets.

Compare, for example, the cloud spending numbers compiled by Deltek using the numbers of contracts verified to be for cloud services and related engineering.

These numbers from the latest iteration of Deltek’s annual Federal Cloud Computing Market report reveal that the DOD’s spending on cloud approached $3B in FY 2020 when the DOD reported that number as $582M. Industry should keep discrepancies like this in mind when estimating the size of potential business opportunity.