Federal Cloud Adoption, Part 2: Raining Contracts
The U.S. government's pursuit of cloud-based technology has been characterized by a blizzard of policies, directives, technical studies, proposed contract vehicles and conferences. The federal "cloud first" initiative, requiring agencies to give priority consideration to cloud solutions for IT operations, began in December 2012. Now, an idea of how much business is at stake for IT vendors has surfaced -- and it's impressive.
On May 3, the U.S. Interior Department reached agreement with Onix International for a potential US$35-million cloud-based internal email system featuring Google Apps for Government. The award culminated a multiyear effort involving contentious litigation between Microsoft and Google. The Interior Department contract followed the huge U.S. Army award announced in early 2012, which has a potential value of $249-million for developing a private Army cloud.
IT vendors should not conclude that the two hefty contracts mean federal floodgates have opened and a wave of eye-popping contracts will be awarded soon. Federal agencies are still in the early days of assessing cloud applications and preparing the ground for later adoption of the technology.
Issues involving data security, proper contract vehicles, service level agreements, standardization and interoperability are still being thrashed out. Some agencies also have indicated that internal agency cultural resistance factors are holding up cloud adoption.
Cloud Investments Will Top $11 Billion
The federal commitment to the cloud appears to be inexorable, and the early flow of actual contracts, as well as budget data and other agency IT information, now has made it possible to come up with more precise cloud investment forecasts.
Annual federal spending on cloud technology will reach $3.2 billion in 2017, according to a recent detailed and comprehensive study from Deltek. Because the forecast focuses on offerings by cloud service providers, it is composed of hosted fee-based cloud services, whether deployed as private, public, community or hybrid clouds.
The current level of federal cloud spending is not exactly small, at $734 million in fiscal 2012. Cumulative federal cloud spending between 2012 and 2017 will be $11.2-billion, according to the Deltek report, which described federal challenges and offered industry response guidance.
With a potential payoff of that scope, vendors are actively positioning themselves for a highly competitive marketing environment. Just as federal agencies are at the preliminary stages of the cloud adoption learning curve, vendors are introducing cloud deployment tools or otherwise bolstering their marketing presence.
Cloud Vendors Taking Initiative
"We are definitely seeing a more proactive approach by IT vendors in the federal cloud space as they try to leverage their offerings for that market, although it varies by the type of business the vendor is in, from hardware to software to off-premises hosting," Geoff Weber, principal in the federal advisory practice at KPMG, told the E-Commerce Times.
"On the other hand, we're also witnessing more reaching out by government for industry assistance through forums and other vehicles. The General Services Administration and the National Institute of Standards and Technology have been active there," he said.
A few recent examples involving both large and small providers indicates the intense level of vendor positioning in the federal cloud market:
Cloud Adoption Tools: In April, Salesforce.com rolled out its Government Cloud offering, which includes mechanisms to accelerate the use of social and mobile technologies; an AppExchange for Government where agencies can find, try and deploy cloud apps that meet their needs; and a Government Partner Accelerator Program to train 1,000 integrators by the end of 2012 to rapidly transform government IT with Salesforce tools.
"Cloud computing is the pathway to transforming government for the social era, and Salesforce.com is the only company bringing the social enterprise vision to the U.S. government. The Government Cloud is a response to government's unique requirements, and breaks down the barriers to innovation that legacy government IT has posed for far too long," Dan Burton, senior vice president of the global public sector at Salesforce, told the E-Commerce Times.
Collaborations: In March, Autonomic Resources joined Red Hat as a certified federal cloud provider. Autonomic Resources works with federal agencies, and its ARC-P cloud platform acts as an Infrastructure as a Service vehicle, offering raw computing power, storage and networking. The companies previously collaborated on Red Hat's Enterprise Linux and JBoss Enterprise Middleware.
"Together, we will bring an open choice to our joint federal customers as we offer the ability to plan, build and manage clouds more easily," said Paul Smith, Red Hat's vice president and general manager for the public sector.
In another collaboration, 8x8 Inc. gained access to the federal GSA contract roster by engaging immixGroup as its public sector reseller.
"We're helping make the 8x8 cloud-based telephony, unified communications, and cloud hosting solutions available through preferred vehicles including our GSA Schedule 70 and SEWP IV contracts," Doug Gaines, director of market intelligence and capture at immixGroup, told the E-Commerce Times.
"8x8 is taking all the right steps to make its cloud offerings easily accessible as federal agency investments are shifting to meet mandates for cloud adoption," he said.
IT Qualification: Locus Technologies, a niche market provider that offers cloud enterprise software for environmental, energy, air, water and compliance management, said in April it had qualified for the GSA Schedule 70 covering cloud and other IT offerings.
"The time has come for government agencies to embrace cloud computing and benefit from a centralized enterprise system," said Neno Duplan, president and CEO of Locus.
The Locus ePortal and EIM, offered in a multitenant government configuration, will allow federal, state, and local agencies to "rapidly deploy the latest environmental and energy management software," Duplan said.
"I think we can assume that vendors are trying to deliver better service, especially when it is customized to the unique needs of government. Otherwise, they won't be able to compete," Deniece Peterson, senior manager at Deltek, told the E-Commerce Times.
In terms of cloud facilitation, vendor assistance covers a wide range.
"On one hand, it means helping agencies modernize and consolidate infrastructure to create an environment to leverage cloud. That means anything from service-oriented architecture (SOA) to virtualization, to application consolidation and migration. The conversations these days, however, are certain to include the ability of these investments to facilitate cloud as part of the value proposition," Peterson said.
"But if facilitation means tools to help agencies take the leap into the cloud once the environment is ready, then there are definitely vendors that are looking at the full lifecycle of cloud deployment and trying to create revenue from developing value-add services that help agencies before and after implementation," she added.
Some examples include cloud-readiness tools from vendors such as IBM, VMware and HP; cloud strategy and consulting from CGI Federal, IBM, SAIC and Booz Allen Hamilton; and cloud transition planning from CGI Federal.
The pace of cloud activity will continue to accelerate, said KPMG's Weber.
"We see federal adoption moving forward largely motivated by the cost savings," he said. "We would prefer to see agencies take a more strategic view and pursue cloud transitions in an enterprise context."