Federal government spending on cloud down in 2017. Wait, what?


After several years of steady growth in federal government spending on cloud, we’re seeing the trend reverse in 2017. Depending on your source, federal government spending on cloud will contract 10-17% this year. Wait, what? How does this make sense given the strong growth of cloud consumption in the commercial sector? Has government lost the plot?

Actually, this contraction represents sound financial judgment. We all know that government employees are prohibited from spending money that has not been appropriated. And we all know that the congressional budgeting process has experienced a bit of start-and-stop. We seem to have wandered back into the Continuing Resolution from Hell cycle. Under the circumstances, prudence dictates caution in making the decision to commit new spending.

OK, but spend is contracting. What’s that all about? Let’s all recall Bezos’s Law which predicts continuous reductions in the price of cloud services. Look at this from a P * Q = S perspective. P is Price, which is shrinking. Q is quantity, which is flat. S is total Spend, which is shrinking. With me so far?

But if price is shrinking, why isn’t anyone taking advantage of the reduced cost to increase quantity? To answer that question we need to take a closer look at the workloads themselves. One of the reasons we saw several years of double digit growth in government spending on cloud is that they were doing the easy migrations first. Web sites in the cloud? Been there. Storage in the cloud? Done that. Virtualized systems infrastructure in the cloud? Bought the t-shirt.

What’s left is a whole lot of heavy lifting. There are stacks of software that are technically incompatible within the cloud. There are cross-system dependencies. There are COTS / GOTS packages that the vendor won’t certify in the cloud. There are data sets with very special control specifications. Most of the workloads aren’t managed with the kind of scripting and digital recipes that are ideal for the cloud. Like I said, heavy lifting.

A significant portion of the installed base of government IT just won’t make it into cloud. It will be faster and cheaper to adopt software as a service, and merely move the people, data and business rules. This will also deliver higher value for money in the long run. The switch will enable the elimination of a large number of outmoded technical constraints. Users of software as a service offerings will benefit from continuous enhancements of new features and functions, along with automatic security fixes. The two biggest challenges will be Management of Change and Certification & Authorization.

As for the remainder of the installed base of government IT well, like I said: heavy lifting ahead. In addition to Management of Change and Certification & Authorization, there will be significant technical modernization work to perform. I’m speaking from experience, we’ve done more than few tough migrations. And we’re looking forward to doing more.

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