Federal Agency Cloud Procurement Trends

Posted by Alexander Rossino on April 25, 2017

Cloud Storage Wars

Back in April 2016, the General Services Administration (GSA) announced that it had finalized the creation of a new Special Item Number, or SIN, for cloud goods and services on its number 70 information technology schedule. GSA heralded the new SIN – #132-40 – as simplifying the process by which agencies can order cloud goods and services from commercial providers.

One year on, the GSA announced that 53 vendors have been approved for business using the new Cloud SIN. Growth in approvals for the SIN is a clear acknowledgement by industry that Schedule 70 is an essential vehicle for selling cloud capabilities to the federal government, but do the available procurement numbers confirm this belief?

Cloud Contract Awards on GSA’s Schedule 70, FY 2015-2017

The short answer to the question above is yes. The data shown below reinforces the fact that agencies are using GSA’s Schedule 70 more than ever for procuring cloud services.

So far in fiscal 2017, agencies have awarded contracts for cloud services valued at $1.6B altogether. This total – assessed by Deltek in April 2017 with just over 5 months of the fiscal year remaining – is three times the total ceiling value of cloud contracts awarded in fiscal 2015. The jump from fiscal 2016 to fiscal 2017 is remarkable as well, amounting to more than twice the total awarded contract value from FY 2016.

Cloud Contract Spending on GSA’s Schedule 70, FY 2014-2016

Actual spending on awarded contracts reveals a different story. The data below shows spending on cloud services contracts awarded via GSA’s Schedule 70 from fiscal year 2014 to fiscal year 2016 (FY 2017 data is not compiled yet).

This data shows a marked slowdown in spending from a high of $221M in FY 2014 to a low of $99M in FY 2016. Identifiable cloud spending in FY 2016 comes in at less than half that reported in FY 2014. Factors accounting for the drop-off are unclear, but it is possible that work on cloud efforts simply slowed down in FY 2016. Anecdotal evidence says that agencies have picked the lowest hanging fruit in moving to the cloud and are now struggling to identify mission-related systems eligible for migration.

Cloud Contract Awards by All Methods, FY 2015-2017

Based on the data presented so far, it looks like the best way for vendors to compete for cloud contracts is via GSA’s Schedule 70. The only way to validate this conclusion, however, is by comparing the total value of awarded cloud contracts across multiple procurement avenues. The data presented below provides this perspective, confirming that agency use of GSA’s Schedule 70 is experiencing a big spike so far in FY 2017. With 5 months left in the fiscal year it remains to be seen if this trend will hold.

Cloud Contract Spending by All Methods, FY 2014-2016

The final chart presented here provides another perspective on cloud spending.

When examining the available data by identifiable procurement type we see that spending has risen on cloud contracts awarded via Government-Wide Acquisition Contract (GWAC) and Blanket Purchase Agreement (BPA). Conversely, it has fallen for contracts awarded via multiple award contracts and GSA Schedules.

Final Thoughts

The data presented here suggests that while more contracts are being awarded via GSA’s Schedule 70, spending is higher on contracts awarded via GWAC. This fact that could indicate that agency customers consider GWACs central to their cloud migration strategies. Put otherwise, when procuring for the most expensive migration efforts agencies tend to turn to GWACs instead of to GSA’s Schedule 70. It pays to know therefore how agencies intend to procure their most critically important cloud efforts because those are the ones they will spend the most dollars on.

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