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Trump Puts Federal Cloud Investments on Front Burner

By John K. Higgins
Nov 22, 2017 7:00 AM PT
federal-cloud-investment

One of the few policies that President Donald Trump's administration has carried over from his predecessor is that the federal government needs to make vast information technology performance upgrades -- especially to cloud-based platforms.

That should comfort vendors seeking business in the federal market at all levels of cloud offerings -- hardware, software or services.

Only 3 percent to 4 percent of federal IT is cloud-based, noted Chris Liddell, director of the American Technology Council.

Federal agencies need to "get that firstly into double digits," and then significantly more in the future, Liddell told CNBC earlier this year.

The council, a federal entity, was established by presidential executive order last May as a vehicle to facilitate IT modernization. Liddell, a former Microsoft and General Motors executive, was appointed director.

The Trump policies, and the work of the council, continue a six-year effort to modernize federal IT, which has met with some success. However, Congress and the White House are pushing for a more aggressive improvement program.

Practical Methods Essential for Investment

However, admonishments and even mandates can only go so far and need to be augmented with practical solutions.

"The swirl of executive orders, Office of Management and Budget policies, and legislative mandates that industry has seen over the last few years can obscure the real factors shaping agency investment in cloud computing," said Alexander Rossino, senior analyst at Deltek, in a September commentary.

Among the recent developments that could have a positive impact on modernizing federal IT and cloud migration, according to Rossino, are the following:

  • A technology bank: Tight budgets have limited federal cloud investments. To spur spending, Congress has proposed a special fund with a total of US$500 million allocated evenly in fiscal years 2018 and 2019. Agencies can borrow from the fund for cloud projects and pay back the loans from efficiencies related to cloud operations, thus creating a revolving fund for all agencies.

    The fund will be administered by the General Services Administration. The funding level was reduced from an original target of $3 billion to gain support from lawmakers. Creation of the fund is part of the Modernizing Government Technology Act, which is likely to pass Congress as a section of the pending National Defense Authorization Act.

  • Adoption Assistance: Even after six years of the federal cloud-first program, acquisition procedures and migration mechanics still need to be improved, according to a September technology council report. The report includes an analysis of impediments to migration and offers suggestions for streamlining procurement, with an emphasis on using commercial cloud resources.

    The council received input from private sector IT companies. GSA this summer issued a how-to guide -- Cloud Adoption Survival, Tips, Lessons, and Experiences (CASTLE) -- to advise agencies on contracting and financial best practices to accelerate the migration of IT operations to the cloud. GSA also took comments from industry for the draft guide.

Agency Attitudes Improve

Another factor that could boost cloud investment is a gradual but significant change in the attitude of federal agencies toward the cloud.

The ideal mix for IT infrastructure would include maintenance of physical servers at 39 percent, with cloud based operations at 61 percent, of which 41 percent would be public cloud resources and 20 percent private cloud, according to federal IT managers who responded to a MeriTalk survey released last month. The survey was supported by Fortinet.

The relatively high proportion of cloud-based IT resources indicates a shift from a few years ago in support of a positive outlook on cloud technology. Within 10 years, the majority of federal agencies will rely on a hybrid mix for core operations, 70 percent of survey respondents said.

Cloud migration is one of federal agencies' top three IT objectives over the next three years, according to survey results Deltek released last month. While 92 percent of respondents targeted cybersecurity, 80 percent focused on cloud efforts, and 41 percent mentioned data center management as a top priority.

Just how all these factors will translate to actual cloud investments is still uncertain.

Positive Trend for Cloud Investments

Annual federal cloud investments will grow from $3.7 billion in 2017 to $6.6 billion in 2022, with a healthy compound annual growth rate of 12 percent, Deltek has estimated.

While that estimate falls significantly short of Liddell's target, it's more than enough to boost the interest of vendors, especially with the technology council's support for commercial IT solutions.

Annual federal IT spending generally is pegged at about $85 billion, although Deltek's estimate is higher due to the inclusion of intelligence operations. By 2022, annual civilian agency cloud spending will be around $3.39 billion, while the Defense Department level will be about $2.53 billion.

"I believe the Administration's actions will have a positive impact on outsourcing, including cloud, but a quantum leap is not in the cards," Deltek's Rossino told the E-Commerce Times.

Agencies will move at the pace they are comfortable with, he noted.

That said, "the policy pieces are in place for much greater investment to come, particularly by the Defense Department in fiscal 2019 and beyond," Rossino said.

While the MeriTalk-Fortinet survey focused largely on the cybersecurity aspects of federal cloud adoption, responses from federal agencies provided some insight on the general pace of cloud migration.

"We see an increased opportunity for vendors -- that is, the right vendors with the right solutions -- in this space over the next two to five years, but are not anticipating a massive short-term leap," said Phil Quade, chief information security officer at Fortinet.

"This is not an overnight process and cannot be solved with rip-and-replace approaches," he told the E-Commerce Times.

"Acquisition remains the real sticking point," noted Rossino. "Can government figure out a way to buy cloud services as a utility?"

Recent government actions are promising, including the establishment of the modernization fund, and a program at the Defense Information Systems Agency to develop IT project accounts that draw on working capital funds to buy cloud services as a utility, Rossino said.

Earlier concerns about security related to cloud adoption may be receding, suggested Fortinet's Quade, as the cloud now offers a better level of security than existing federal IT operations.

Providers such as Fortinet and others have developed cloud support offerings that support federal security requirements, he said.

"In fact, there are options that can not only enable agencies to ensure that their choices keep government and citizen data safe, but actually increase visibility and control, enable agile segmentation, and otherwise protect their systems at speed and scale in distributed and multicloud environments," Quade noted.

Procurement procedures remain a persistent issue, but improvements are emerging.

Multiple Paths to Cloud Acquisition

A related issue is avoiding vendor lock-in. Agencies may be reluctant to invest in cloud platforms "because interoperability between cloud solutions just isn't there," Rossino said.

However, help in that regard also is on the way. The National Institute of Standards and Technology and Institute of Electrical and Electronics Engineers have been collaborating to develop standards that will enable cloud solution interoperability.

"Once implemented, these standards will remove vendor lock-in concerns and give agencies confidence they can move to the cloud with as little hassle as possible," Rossino said.

Standardizing and simplifying IT acquisition is a continuing concern, and GSA's cloud procurement template has been a helpful tool. All federal agencies can use the template, so each agency doesn't have create a unique procurement contract. GSA added the mechanism to its standing "Schedule 70" procurement vehicle that covers acquisition of a wide range of IT capabilities.

The GSA Schedule 70 has now "become the dominant method agencies use for procuring cloud services," Rossino noted.

"Full and open procurements just aren't out there in the number they used to be," he said, adding that if a business doesn't have a place on the Schedule 70, "you are really out of the game."


John K. Higgins has been an ECT News Network reporter since 2009. His main areas of focus are U.S. government technology issues such as IT contracting, cybersecurity, privacy, cloud technology, big data and e-commerce regulation. As a freelance journalist and career business writer, he has written for numerous publications, including The Corps Report and Business Week. Email John.


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