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Cloud spending to account for half of federal govt IT budget by 2018

Lower price points for cloud services and the changing nature of cloud computing is helping to drive federal government cloud consumption in the US, according to a new report from IDC.

In fact, according to IDC, cloud spending represents about 8.5% of all IT spending by the federal government for fiscal year 2016 (FY16). This represents a significant increase from the roughly 5% dedicated to cloud in FY15.

According to the report, federal cloud spending for FY15 actually came in at more than double what Office Management and Budget (OMB) originally predicted when the FY15 budget was originally released.

As in the previous two years, OMB has predicted only a slight increase in cloud spending for FY16, and now the current estimate is just over $6.7 billion for FY16.

This increase was likely accelerated because of the cost savings that some agencies achieved by moving toward hosted solutions. The increased level of spending on cloud solutions also indicates that OMB's pressure on agencies to move to standardised cloud-based solutions is having a significant long-term effect, IDC says.

Furthermore, according to the report, while total cloud spending is going up, the nature of cloud spending itself is changing. For example, the way that the government labels its cloud categories is shifting.

Last year, infrastructure as a service (IaaS) was the largest spending category, followed by software as a service (SaaS). However, this year, the federal government added a new cloud category simply titled ‘Other’. This other category immediately became the top bucket for cloud spending, IDC says.

This reflects the fragmented nature of cloud solutions, in that there are some types of calls to cloud-based databases, application programming interfaces (APIs), and shared services that don't fit easily into the current cloud categories, says IDC.

The spending breaks out under the new categories as follows:

  • SaaS saw a slight increase from $700.7 million in FY15 to $702.9 million
  • IaaS saw a slight increase from about $1.1 billion to nearly $1.2 billion
  • Platform as a service (PaaS) rose from $227.1 million to $231.3 million
  • Other cloud spending was not mentioned last year. Now the federal government says it spent $4.6 billion on that category in FY15 and will spend about $45.2 million more than this for FY16

"Clearly, lower price points for cloud services and the changing nature of cloud are helping to drive federal cloud consumption into new directions, resulting is substantial growth in some consumption patterns," says McCarthy. "We believe that cloud spending will eventually grow to about 50% of all government IT spending, but that number will not be reached until 2018."

As for compatibility, processes such as FedRAMP continue to help vendors make their cloud-based solutions available to federal agencies. In addition, expectations for self-service on the part of both citizens and younger government employees will drive new cloud investments because this can (potentially) be a shortcut to offering real-time solutions and instant provisioning, IDC says.

Vendors that can promise such capabilities while also meeting FIPS, FISMA, and other FedRAMP standards will find a ready market within the government for high-quality solutions, says IDC.

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