Federal Cloud Spending Trends Toward All-Time High

Federal cloud computing spending is at an all-time high.

According to an analysis from Bloomberg Government, defense and civilian agencies combined to spend $6.5 billion on cloud services in fiscal 2018, a 32 percent increase over the $4.9 billion spent in fiscal 2017.

Fiscal 2018’s tally marks the eighth consecutive year of growth in the federal cloud market, according to analyst Laura Criste. Civilian agencies, led by the Health and Human Services Department, NASA and Veterans Affairs Department, will account for approximately $4.4 billion of the cloud spending when the fiscal year closes Sept. 30, while the Defense Department will spend approximately $2 billion.

The analysis suggests agencies have $1.8 billion remaining to spend on cloud services in the weeks before fiscal 2018 ends. This “could mean a rush to award cloud contracts and task orders before Sept. 30,” the analysis states.

Bloomberg Government’s analysis, which is based largely on data within the Federal Procurement Data System, also includes a ranking of the top 10 cloud service providers based on federal revenue. The list is topped by Perspecta, Inc., which captured $1.1 billion in obligations over the past two fiscal years. Perspecta is the new name of three big tech contractors—Vencore, DXC Technology’s public sector business and KeyPoint Government Solutions—that merged last year.

Other large contractors capturing hundreds of millions of dollars in federal cloud revenue include General Dynamics, which recently purchased CSRA, SAIC and Leidos.

Amazon Web Services, the largest commercial cloud service provider in the world, is noticeably absent from Bloomberg Government’s revenue rankings. However, most of AWS’ public sector revenue is through subcontracting work rather than prime contracts, and thus harder to track, according to Chris Cornillie, federal market analyst at Bloomberg Government.

In addition, spending from AWS’ biggest federal cloud contract to date—a $600 million deal with the CIA—is not reported, since it is counted as classified spending. However, the growing popularity in government for commercial cloud providers is not limited to AWS, Cornillie said, and that’s the catalyst for the continued increase in federal cloud spending.

“Right now the big growth driver is the shift from private to public cloud,” Cornillie said. “In the past, agencies were more comfortable building cloud data centers on-premises, but now, as a result of factors, they’re going to commercial providers.”

With two pending multibillion cloud procurements—the $10 billion Joint Enterprise Defense Infrastructure and $8 billion Defense Enterprise Office Solution—the Defense Department is primed to further drive up federal cloud spending in fiscal 2019.