Federal Cloud Spending Soars in 2018

The federal government has officially unveiled a new cloud strategy, dubbed “Cloud Smart.” But according to recently reported data, agencies have found it smart to move to the cloud well before the Office of Management and Budget released the plan. 

Cloud services contract obligations were expected to increase by about 32 percent in fiscal 2018, reaching an all-time high, according to an analysis by Bloomberg Government. The fiscal year ended Sept. 30. 

The report found that obligations were expected to reach about $6.5 billion in fiscal 2018, up from $4.9 billion in fiscal 2017. Bloomberg Government notes that would mark the eighth consecutive year of market increases in cloud contracts. 

Both the Defense Department and civilian agencies were expected to boost their cloud services spending in FY 2018, the report notes, with DOD expected to spend about $2 billion this year, and civilian agencies spending about $4.4 billion.

Cloud spending is rising for several reasons, including the agencies’ migration to Microsoft’s Windows 10 and Office 365, agencies’ shift of email systems to the cloud, and agencies’ overall IT modernization efforts, which include data center consolidation and modernization.

Which Agencies Are Driving Cloud Spending?

The Bloomberg Government findings were drawn from an updated cloud services market definition in the outlet’s Contracts Intelligence Tool. Bloomberg Government analysts periodically update the market definitions in the tool to better represent how the government buys products and services “by adding new keywords, removing false positives found while using the markets, and refining the definition to better meet clients’ needs,” according to the report. 

Bloomberg Government refined the definition of cloud services based on client feedback and removed false positives. The updated definition shows that the agencies and bureaus buying the most cloud services since fiscal 2014 include the Defense Department, the Department of Health and Human Services, NASA and the Veterans Affairs Department.

The report notes that agencies spend that money mostly through indefinite-delivery or governmentwide acquisition contracts. The top contracts include Centers for Medicare and Medicaid Services Virtual Data Center ($500.7 million in fiscal 2017 obligations), Alliant ($346.5 million), and Schedule 70 ($277.6 million).

For fiscal 2019, Bloomberg Government expects cloud services spending to continue rising. Agencies throughout the government are competing for cloud services contracts, and many of them will be awarded in fiscal 2019. Most notably, the DOD’s $10 billion Joint Enterprise Defense Infrastructure contract is expected to be awarded this fiscal year; the Pentagon extended its deadline for proposals from Sept. 17 to Oct. 9. 

Agencies Shift to the Cloud for a Variety of Reasons

There is no single reason why cloud spending hit an all-time high this past fiscal year. Many agencies have migrated legacy on-premises email systems over to public cloud platforms to boost productivity and collaboration. 

“We look at this as more than just an email platform,” Justice Department CIO Joseph Klimavicz previously told FedTech. “Our Office 365 team sites and portals help the department stay connected, share information and make better decisions. By getting everyone on a single platform, we can enhance our collaboration capability and employee productivity.”

Many others are shifting to the cloud with their moves to Windows 10, and are doing so for added cybersecurity benefits. 

The intelligence community is continuing its push into the cloud, in part for analytics and artificial intelligence capabilities. In May, the IC announced an agreement with Microsoft to use Windows 10 and Cloud for Government, including Office 365 U.S. Government and Azure Government. Sue Gordon, principal deputy director of national intelligence, said in August that the IC has seen an “explosion” in cloud usage that it did not anticipate. 

Various DOD components, including the Air Force and the Navy, are continuing their use of and migration to the cloud. 

And all agencies are shifting workloads away from on-premises data centers and into virtual machines as they consolidate data center operations under the Data Center Optimization Initiative. For example, the Agriculture Department is moving to consolidate 39 data centers into two. Moving to the cloud, according to USDA’s Chad Sheridan, gets agencies out of an infrastructure “death spiral.”

This content is made possible by FedTech. The editorial staff of Nextgov was not involved in its preparation.