Federal Cloud Spending Tops $6.6 Billion

Federal agencies collectively spent $6.6 billion on cloud computing in fiscal 2020, up from $6.1 billion in fiscal 2019, according to a government spending analysis by Bloomberg Government.

The analysis indicates agency spending on cloud services slowed slightly compared to other years in the decade-long uptick but suggests several potential reasons for slowed growth.

Two multibillion-dollar Pentagon cloud contracts, the Defense Enterprise Office Solutions and Joint Enterprise Defense Infrastructure, were delayed over bid protests. While DEOS has been awarded, JEDI—which has a ceiling of $10 billion—remains in court.

Meanwhile, additional multimillion-dollar cloud acquisition efforts at the departments of Homeland Security, State and Education were delayed during the pandemic.

“After only modest growth in FY 2020, BGOV expects spending to rebound as agencies such as DOD, DHS, and Education resume delayed acquisitions,” the report states.

Civilian agencies accounted for $4.5 billion of the $6.6 billion the federal government spent on cloud infrastructure, platforms and software in fiscal 2020, 7.2% above the $4.2 billion civilian agencies spent the prior year. Meanwhile, defense agencies accounted for $2.1 billion in fiscal 2020.

The Department of Veterans Affairs and the Centers for Medicare and Medicaid Services lead all civilian agencies in cloud spending, each spending about $2.7 billion since fiscal 2016.  

Carahsoft Technology Corp. is the top cloud services supplier to the Defense Department, earning $634 million since fiscal 2016, according to Bloomberg. Dell Technologies, Leidos, Science Applications International Corp. and Northrop Grumman rounded out the five highest-earning companies among defense cloud contracts since 2016.

Perspecta Inc. topped civilian agency cloud suppliers, having generated $1.4 billion in revenue since fiscal 2016. Perspecta was purchased by Herndon-based Peraton for $7.1 billion in January. The next four highest were T-Rex Solutions, General Dynamics, Leidos and Carahsoft over that five-year period. Cloud resellers dominate both civilian and defense markets, with Perspecta among the largest resellers of Amazon Web Services cloud services and Dell a top reseller of Microsoft’s.

In terms of what federal agencies are buying, infrastructure- and platform-as-a-service have made up about half of all cloud computing obligations since fiscal 2013, according to Bloomberg. However, spending on software-as-a-service and additional cloud support services “rose sharply,” the analysis found, a signal of increasing maturity among government cloud customers.

While legal disputes and the pandemic slowed some cloud spending in fiscal 2020, the Bloomberg analysis expects government spending to rebound significantly in the coming years. The analysis forecasts “expected growth of about 9-10% annually” through fiscal 2023, with a total expected spend of $8.5 billion across government. 

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