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Feds Loosening Purse Strings for Cloud Deployments

Federal investment in cloud technology is picking up steam and should increase sharply in the next several years — but that doesn’t mean that government agencies suddenly have found that cloud migration will be either quick or simple.

Federal cloud spending will jump from slightly more than US$3 billion in fiscal 2014 to $9.9 billion in fiscal 2018, according to IDC Government Insights’ September update of its government cloud investment forecast.

The Office of Management and Budget for the past five years has been encouraging agencies to look first to a cloud solution for upcoming IT requirements. In addition, agencies have been required at least to stick a toe in the water by shifting a minimal number of IT operations to a cloud environment.

“The ongoing level of spending on cloud solutions indicates that this effort is finally having a significant long-term effect. Total cloud spending is going up and the nature of cloud spending itself is changing,” IDC said.

Cloud spending will be steady at around $3 billion per year for both 2014 and 2015 before a significant gain to $4.81 billion in 2016, and to $7.87 billion in 2017, according to the forecast.

Efficiency Remains Attractive

“The main reason we believe that growth will continue is that cloud is proving to be a cheaper solution in some cases for government agencies. For that reason alone, some will make the switch — although that kind of commitment should not be made without a detailed return on investment analysis,” said Shawn McCarthy, a research director at IDC.

“The growing acceptance of Software as a Service, and the ability of individual subdepartments within agencies to quickly self-provision the software solutions they need” will stimulate cloud adoption, McCarthy told the E-Commerce Times.

Also, the maturing of the Federal Risk and Authorization Management Program, or FedRAMP, which is designed to provide a government-wide cloud security protocol that will save each agency from the expense and effort of separately developing its own cloud security standards, will facilitate more cloud spending.

“Currently, the FedRamp program has evaluated and found up to 18 separate cloud services compliant with National Institute of Science and Technology security controls, which implies that they can be safely consumed by U.S. public sector agencies. So now that we have some targets, the difficult task of moving to and consuming those services is under way,” Kirk Kern, chief technology officer for the NetAppU.S. Public Sector, told the E-Commerce Times.

Where the Money Will Go

Following is how federal investments in cloud configurations will shape up, by type, according to IDC.

Private Cloud: Annual spending will reach $5.90 billion by fiscal 2018, accounting for 60 percent of cloud funding that year. Growth will be driven largely by the government’s need to procure solutions that meet specific IT security standards. The Social Security Administration currently is the leader, with private cloud investment averaging a little more than $1.5 billion per year for fiscal years 2013 to 2015. The Department of Homeland Security is next, with investment averaging $140 million annually in 2013 to 2015.
Public Cloud: Investment will reach $3.01 billion in fiscal 2018. It will be sparked by increased levels of trust for some types of public cloud, and by low-risk types of solutions — such as hosted websites and storage of content that is considered public information. The Department of Defense will spend about $90 million per year in fiscal 2013 to 2015 on public clouds, followed by the Department of Housing and Urban Development at $4 million in 2013; $10 million in 2014, and $35 million in 2015.
Community Cloud: Spending will reach $406.9 million in fiscal 2014 and expand to $868.9 million by fiscal 2018. Much of this growth will come from traditional shared services solutions, focused around specific Federal Enterprise Architecture Business Reference Models — components that are known as “Primary Service Areas.” The Justice Department will be the leader for community cloud.
Hybrid Cloud: Investment in fiscal 2014 will be $135.1 million but will decline to $118.8 million by fiscal 2018.

“Hybrid is created when some clients use a variety of cloud solutions to ‘roll their own,’ creating mash-up style applications,” IDC said.

While “hybrid cloud is the wave of the future, it’s not necessarily a discreet spending category,” the report notes.

The only agency expected to have a significant jump for hybrid cloud spending is the Treasury Department.

Functional Cloud Deployments Tracked

On a functional basis, Software as a Service spending by federal agencies will reach $2.90 billion in 2018, according to IDC. Common functions like office software, email, web hosting, and shared content management platforms such as SharePoint will be drivers.

Platform as a Service investments should reach slightly more than $700 million in 2014 and then hit $1.2 billion in 2018.

“We cited accelerating PaaS rollouts as a critical area of improvement needed in 2013 to maintain a strong cloud momentum. The federal government has made progress in this area, and growth will continue,” IDC said.

Federal Infrastructure as a Service spending actually has declined recently, as investment levels dropped from a little more than $1 billion in 2012 to $842 million in 2013, IDC reported.

“For 2014, we anticipate a spending to bounce back, eventually reaching $986 million. By 2018 spending should see a nice jump — all the way up to $5.8 billion,” the report notes. Large systems integrators will be the key players for this function.

Cloud Conversions Remain Challenging

The accelerated pace of investment should not mask the fact that federal agencies will find cloud migration a continuing challenge.

Only 44 percent of federal IT managers felt either “very comfortable” or “somewhat comfortable” about turning agency IT services and applications over to cloud providers in survey recently conducted by MeriTalk.

The poll of 153 federal managers showed that 32 percent of respondents felt either “uncomfortable” or “somewhat uncomfortable” about cloud migration, while 24 percent registered a neutral position.

The September 2014 report was supported by NetApp and Arrow Enterprise Computing Solutions.

The Congressional General Accountability Office also reported that federal agencies still face significant hurdles in migrating to the cloud.

Data security and agency culture are factors that continue to impede cloud migration, GAO found in a report on seven major civilian agencies.

Insufficient network infrastructure and a shortage of expertise in acquiring and managing cloud programs also will inhibit adoption, agencies reported.

Most migrations to date have involved IT modernization or newer IT requirements rather than older legacy systems, GAO said in a September 2014 update on federal cloud deployments.

“If legacy applications are considered more by federal agencies for cloud migration, there could be a huge uptick in the percent of IT budgets that are dedicated to the cloud. The federal government needs to do a much better job of considering existing services for the cloud,” David Powner, director of IT management issues at GAO, told the E-Commerce Times.

Cloud and related services vendors obviously need to be tuned in to the investment goals and remaining hurdles facing federal agencies.

Vendors should “work directly with system integrators to make sure they are aware of your cloud offerings — use them as a powerful sales channel,” IDC’s McCarthy advised.

Providers should go through the FedRAMP process, he also suggested. “Even though it doesn’t guarantee you any new business,” it enhances a vendor’s status as a “serious player” in the federal market space.

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