Tech & Sourcing @ Morgan Lewis


As discussed in a post from last month, annual spending worldwide on cloud services continues to rise with an expected increase up to $332 billion by the end of 2021, which is an increase from $270 billion in 2020. While the private sector is marching forward with increased reliance on hosted services, US government organizations have followed suit by increasing spending in cloud-based solutions allowing them to capitalize on the cost-savings and innovation gained by SaaS offerings.

In fact, 2020 was a “historic year” for federal cloud migration and federal government cloud spending is continuing to rise, according to a recent article in the E-Commerce Times. Annual federal spending on cloud computing will grow from the $6.8 billion level in 2020 to an estimated $7.3 billion in 2021 and to $7.8 billion in 2022.

While the COVID-19 pandemic certainly necessitated a short-term boost in cloud spending and accelerated acceptance of cloud solutions, the seeds of the federal government’s shift towards the usage of the cloud originated in 2009 as the it began shifting its data storage needs to cloud-based services and away from agency-owned data centers, according to this report by Congressional Research Service. Additionally, in 2018 the Trump administration developed the “Cloud Smart” strategy to accelerate agency adoption of cloud-based solutions designed to modernize information technology, improve citizen services, increase security, and realize cost savings.

Cloud adoption is helping governments to improve business flexibility. Federal organizations such as the armed services, DOJ, USDA, Department of Education, and more have been early cloud adopters with civilian agencies such as the Department of Homeland Security and Department of Commerce also focusing on shifting towards cloud solutions. Some of the key areas the US government is focusing on with increased migration to the cloud include:

  • IT consolidation: Government agencies realize the benefits of IT consolidation to increase operational efficiencies and cost reduction by replacing old and outdated hardware.
  • Shared services: More government agencies are leaning towards sharing IT services through SaaS solutions to reduce costs and to improve business process efficiencies by becoming increasingly agile and responsive to changing business conditions.
  • Improved citizen services: We are all aware of how inefficient and slow it can be in dealing with government entities for even basic services. As the US government continues to grow its cloud-based infrastructure, citizen services should reap the benefit as inefficiencies are eliminated.

Federal investment into cloud technology is the rare “unicorn” issue that has garnered strong bipartisan support in both Congress and the Executive Branch as the Biden-Harris administration has continued the upward trajectory of federal cloud spending. The continued focus on cloud services presents increased business opportunities for companies with cloud-based offerings.