Shifting priorities in U.S. federal information technology spending can best be understood by holding a lens up to two recent trends.
1.Total federal cloud spending for Fiscal Year 2017 is expected to decrease by 17.2% (vs. FY 2016). That’s a substantial drop, from $2.6 billion to $2.2 billion.
- Besides classic cloud spending, this year, federal agencies will spend $4.1 billion on cloud-like solutions, which are best described as falling into a provisioned/shared services/other category. This too is down a bit, from $4.6 billion last year.
- This mix of formal cloud spending and quasi-cloud spending is why you sometimes see total cloud spending listed as somewhere in the mid $6 billion range.
2.Total Federal IT security spending for FY 2017 is expected to increase 7.9%, from just under $3.5 billion to a little over $3.7 billion.
While the Trump administration has emphasized that it will focus on various types of cost cutting for the next few years, the decrease in cloud spending actually has its genesis in the formulation of the FY 2017 budget, which took place before the 2016 election.
Basically, cloud plans are hitting the doldrums this year, after several years of steady growth. But security spending has ramped up in response to rapidly expanding networks (thanks to the Internet of Things) and multiple international hacking attempts.
The Ups and downs of Cloud
For cloud spending, a decline of this magnitude was unexpected, especially given the multiyear double-digit growth trajectory we’ve seen for federal cloud investments. But the good news is that FY17 appears to be an anomaly. The long-term potential for federal cloud growth remains solid, and we very much expect to see spending increases resume for fiscal years 2018 through 2021.
There are several reasons for the temporary decline.
- The full federal IT budget (meaning all categories, not just cloud) is down about 1% for FY 2017. Thus, overall budgeting is having a slight, albeit very low-level, impact on the total cloud number.
- The low-hanging fruit for cloud has been picked. For example, spending on cloud-based email services peaked around 2012, and has gone down every year since, mostly as price-points have eroded. Also, most agencies have long since moved a big percentage of their storage, Web sites and systems infrastructure to the cloud.
- The next phase of cloud migration will be more complex. The act of migrating can require things like large-scale changes to data fields, APIs and middleware. For this reason, some agencies are waiting to see if they want to update current systems, of go full “green field” in their approach by starting over.
So, the cloud lull eventually will work itself out. The real long-term winners of cloud will be providers capable of pulling a large developer ecosystem along with them. That is what we are seeing now with Amazon Web Services (AWS), and, to a lesser extent, Microsoft Azure. Many solution developers build everything right on the AWS or Azure platforms and offer their solutions from there, and government is taking notice.
Our subscribers have access to the full cloud document, including cloud spending by agency, by deployment type, and more, here: U.S. Federal Government Cloud Forecast, 2017–2021.
The Ongoing Challenge of Federal IT Security
The healthy growth of federal IT security spending is due to ongoing threats to government systems. These include foreign attempts to tamper with political parties, elections, and federal agencies; threats to the nation's physical infrastructure (dams, bridges, water systems, and more); and constant monitoring of network traffic to identify attempts to exploit weaknesses and to compromise data and systems.
Within the government itself, the phrase IT security increasingly is used to refer to
- traditional system security (such as packet monitoring, virus monitoring, and
- detecting hacking attempts) and the IT systems that serve a security agency.
The data we have collected refers mainly to #1.
As mentioned above, spending on IT security, specifically hardware, software, and IT services. Should reach $3.7 billion for 2017, growing to $4.7 billion by the end of 2020.
Our subscribers have access to the full security forecast document, including breakouts by agency and by hardware, software and IT services, here: U.S. Federal Government IT Security Spending Forecast, 2017 to 2020.