The government is spending less on cloud technology this year, but a coordinated move to cloud in a logical way should pay big dividends for agencies after 2104.
Today's accepted wisdom is that the federal government is steadily expanding its use of cloud-based computing. But the reality is a bit different. Although the long-term growth potential for government cloud solutions remains high, we are currently experiencing a significant lull.
Many federal agencies will spend less money on cloud solutions during fiscal 2013 than they did in 2012. The for the slowdown range from sequestration to challenges relating to closing large data centers, to the complexity of standardizing and merging similar applications — especially when it turns out those seemingly similar applications have dissimilar data structures and business rules.
According to the Office of Management and Budget, federal spending on software as a service (SaaS) will drop from $764.8 million in fiscal 2012 to $739.8 million in fiscal 2013. Platform as a service (PaaS) spending will drop from $317.3 million to $315.1 million.
Government goes its own way
The bright spot right now for the federal government is infrastructure as a service (IaaS), which should jump 20 percent between this year and 2014, from $ 1.0 billion to over $1.2 billion. This makes government different than most industries. For most commercial firms, SaaS solutions, particularly stand-alone applications, are by far the largest slice of cloud spending.
Here's a good way to picture the difference between IaaS and PaaS. IaaS essentially rents computing resources so that agencies do not have to purchase their own. This can include servers, storage, networks and such. PaaS likewise supplants formal capital ownership, but it also includes the capability to deploy — into the cloud — end-user created (or purchased) applications using programming languages and running in their appropriate environment.
Solutions vary from vendor to vendor, but, essentially, PaaS includes a solutions-associated computing "stack" and one or more applications that have been custom-created on that stack and deployed as part of a cloud-hosted environment.
So why is the government preference so starkly different, with its strong preference for IaaS? Consider the history.
Government has long worked with third-party integrators to build complex systems. Just think of the defense and space communications networks built by companies like Boeing Satellite Systems and Lockheed Martin. IaaS solutions already are a high priority for government agencies because this arrangement gets agencies out of the business of building and managing networks and complex systems. Instead the agencies can focus on managing applications that are unique to them.
On the software side, most government applications were built for unique government needs. Consider the Agriculture Department's Water and Climate Information System or the Labor Department's Unemployment Insurance Database Management System. Good luck finding a cloud provider who can offer these as COTS cloud solutions.
As for types of clouds, federal private cloud spending currently outnumbers public cloud spending about 20 to one. Government has unique security needs, such as FIPS compliance for civilian agencies and DIACAP certification for Defense organizations. Government also needs to work with trusted partners in highly controlled environments. For that reason, private cloud solutions will be the clear preference for the next several years.
Agency trend setters
Among agencies, the Treasury Department has stepped most heavily into the public cloud space, working with Amazon’s EC2 cloud for its main website, and some types of hosted content management. Amazon also hosts other federal sites, including the Energy Department and Recovery.gov.
The Justice Department also has been a leader in exploring community cloud solutions. A community cloud is when multiple agencies or multiple levels of government share a hosted solution. This makes sense for Justice, considering how the department needs to share information and databases with all states and literally thousands of local jurisdictions. Justice works with Salient Federal solutions, which hosts one of the country's largest law enforcement SaaS solutions — for wireless criminal justice data.
And Social Security Administration is a federal leader in both IaaS and PaaS. The agency works with a variety of vendors for solutions such as identity proofing and management, hosted storage and an online knowledgebase and FAQ system. Last year SSA conducted significant research into large hosted storage systems.
For the long term, fiscal 2014 is likely to show continued cloud stagnation. OMB has stated that cloud spending could actually drop by a couple of percentage points. However, we expect to see slow but healthy recovery beyond that year. Large sustainable cloud growth could finally happen for the federal government starting in fiscal 2015. IaaS will continue to grow, and it looks like hosted SaaS will finally catch fire, as government application standardization efforts take hold for many types of commodity solutions.
The federal government clearly isn't the fastest out of the gate when it comes to adopting cloud solutions, but it is quietly making a coordinated effort to move toward cloud in a logical way, by first getting its own house in order and standardizing its approach to commodity cloud solutions.
It may be a frustrating wait, but the outcome should be powerful and financially significant. Just wait a year or two.