Federal agencies make 2013 the year of cloud

December 29, 2013

This past year will long be remembered by government contractors as the year that federal cloud adoption began in earnest.

Between October 2012 and September 2013, federal agencies awarded over $17 billion in cloud computing-related contracts. After a couple of years evaluating and piloting cloud technology, federal customers dove in headfirst, awarding large contracts, such as the Interior Department’s $10 billion Foundation Cloud Hosting Services program and the CIA’s hotly contested $600 million cloud infrastructure award.

Practically every federal agency awarded cloud-related contracts in fiscal 2013, but this growth was not evenly distributed across the government. Awards by civilian agencies totaled $16.5 billion, far outstripping the $65 million in total awards made by defense agencies and the military services.

Why the discrepancy? Two critical factors come to mind: security and mission requirements. Concern about the security of data in commercial clouds is a hurdle that the Defense Department has been slow to overcome.

However, the Pentagon’s lethargy should not be taken as disinterest in cloud computing. The Defense Information Systems Agency established a cloud broker program office this year that should result in a commercial cloud services contract competition sometime next calendar year.

Demonstrating that Defense Department data will be secure in vendor-managed clouds — including receiving certification from the General Services Administration’s Federal Risk and Authorization Management Program, known as FedRAMP — will be critical to contractors that want to win one of these contracts.

The Defense Department is also concerned about the dependability of retrieving data from the cloud. Down time for a cloud-based business system is inconvenient; down time for a critical battlefield capability could be deadly, and military personnel remain deeply skeptical about the reliability of Internet-based services under combat circumstances.

This is likely to change as companies demonstrate more reliable solutions that can be deployed on the battlefield, but the transition could take some time.

In contrast to the Pentagon, civilian agencies have adopted a “full speed ahead” attitude toward the cloud. Small organizations such as the Railroad Retirement Board and the Federal Trade Organization punched above their weight class in fiscal 2013, providing cloud vendors with opportunities in the federal government well beyond the largest agencies.

Contractors should also note that cloud adoption by federal agencies accelerated at a time of political gridlock and fiscal uncertainty. Chalk this up to the prospective cost benefits and convenience that cloud can provide, including the ability to scale expenses based on need.

Correlation is not causation, but it looks like political gridlock in Congress inadvertently drove cloud adoption in 2013. If this pattern holds, the next few years promise to be very good for businesses offering cloud services to federal customers.

Alex Rossino is a principal research analyst at Herndon-based Deltek, which conducts research on the government contracting market and can be found at www.deltek.com.

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