McLean, VA, Friday, May 13, 2016–With $1 billion for the Department of Defense and $200 million each for the Departments of Commerce and Homeland Security, these three agencies lead the public sector market for government spending on cloud implementation, according to the most recent analysis by immixGroup’s Market Intelligence team.

A few trends are driving the increased spending, including new data center consolidation initiatives, recent changes in cloud security requirements, and agencies taking new approaches to cloud. The analysis was given at a recent sold-out event at immixGroup’s headquarters by Market Intelligence analysts Chris Wiedemann and Lloyd McCoy Jr. immixGroup, an Arrow company, helps technology companies do business with the government. 

Among the most significant federal cloud trends:

• Department of Commerce and Department of Homeland Security were early cloud adopters and continue to lead the civilian agencies by a large margin—each have requested about $200 million to spend on cloud for FY17. Agency funding requests drop off with Treasury at $150 million in FY17 and the Department of Agriculture dropping to $100 million. DOD’s budget request also dropped in FY17 to $1 billion from $1.2 billion the previous year.
• Private cloud continues to dominate civilian agencies, followed by public cloud models. Community cloud has a small presence, but is important at the agencies that use them like the Department of Justice. Hybrid cloud is also a small fraction, but it’s an area that’s prime for significant growth. DOD has dedicated most of its cloud budget toward public clouds, followed by private models. Community and hybrid clouds make up a small fraction of DOD cloud spending.
• Civilian agencies and DOD are still primarily putting their money into Infrastructure-as-a-Service, followed by Software-as-a-Service. Platform-as-a-Service continues to be the smallest piece of the pie for civilian, and practically non-existent for DOD.
• Expect to see a rise in true cloud adoption, driven by the replacement of the Federal Data Center Consolidation Initiative (FDCCI) with the Data Center Optimization Initiative (DCOI). There’s a renewed focus on data center closures and centralization, with particular emphasis on more cloud adoption and more use of shared data center services.
• Changes to the Federal Risk and Authorization Management Program (FedRAMP) will also drive more cloud adoption. The General Services Administration (GSA) is overhauling FedRAMP, making the authorization process for cloud service providers selling to government faster and more efficient. GSA says the new process will cut the approval time down to about six months.
• Agencies may follow NASA’s lead in trying new cloud strategies. The agency is using SEWP, a government-wide acquisition contract vehicle, to purchase cloud services in a lump sum and then billing their monthly usage against that previously established lump sum. (Think Starbucks card.)

immixGroup’s cloud briefing was followed by a panel of government clouds leaders that included Office of the DOD CIO Robert Vietmeyer; NASA web services executive Roopangi Kadakia; Air Force CTO Frank Konieczny; and Navy deputy CIO Janice Haith.

Despite projected cloud growth, some agencies still face the following challenges:

• Outdated fiscal laws aren’t keeping up with cloud adoption and innovation. Current law prevents agencies from strategically allocating cloud dollars across offices, managing multiple applications in the cloud and the individual contracts attached to them, and being able to quickly obtain more funds if a crisis like a security breach occurs.
• Agencies also say outdated laws are preventing them from adopting a fee-for-service utility model, which is ideal for cloud environments, says Vietmeyer.
• Agencies are finding that not all applications are cloud-ready. For example, Haith said Navy can’t move certain applications to the cloud because they then won’t be accessible to personnel out at sea. Vietmeyer said many of DOD’s applications aren’t designed for the cloud and reengineering them is not the right investment.

immixGroup Market Intelligence analysts Chris Wiedemann and Lloyd McCoy Jr., are available for interviews. An on-demand recording of the event is available here. Photos, courtesy of immixGroup, are also available upon request.