Recent developments point to increasing dynamism and growth in the market for federal government cloud services in the US.

- In mid-March it was reported that Microsoft is closer to the commercial launch of its Azure US Government Cloud. It will be commercially available in 2015, when Microsoft’s government cloud platform will provide Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS) offerings to US government agencies.

- In late March, Cisco announced plans to spend US$1bn over the next two years on developing its own cloud service portfolio for large corporations and government bodies. Cisco Cloud Services will be delivered via a network of channel partners and will target enterprise and government customers looking to deploy hybrid clouds.

- Also in late March, cloud market giant, Amazon Web Services (AWS), announced it had been awarded a new level of security certification from the US Department of Defense (DoD). The additional level of security accreditation means that Amazon will be able to target even more government agencies with its cloud computing services.

Moves made by Microsoft, Cisco and Amazon to create government cloud offerings – and acquire new certifications for existing offerings – reflect the strong potential for growth that is attributed to this market.

Although spending on cloud services by federal agencies still represents a small proportion of total IT spend, spending is predicted to rise significantly over the next few years.

There are ‘push’ and ‘pull’ factors driving this trend. One push factor is the Federal Data Center Consolidation Initiative (FDCCI), established in 2010 to reverse the historic expansion of federal data centers. The FDCCI’s goal is to consolidate at least 800 government data centers by 2015. The government also wants to reduce the cost of data center hardware, software and operations, shift IT investments to more efficient computing platforms, promote ‘green technologies’ and increase IT security.

IT consolidation is also seen to increase operational efficiencies while shared services are seen to not only cut costs but boost business process efficiencies.

Market growth
The growth potential of the government cloud market is reflected in the rising number of providers targeting this sector. In addition to Amazon, Microsoft and Cisco, major cloud service providers include technology vendors such as IBM, HP, Dell, Oracle and VMware. Telecoms network operators such as AT&T, Verizon and CenturyLink – the latter two provide government cloud services through their Terremark and Savvis businesses respectively – are also targeting the market. Content delivery network service provider Akamai also offers cloud-based services to federal government agencies, including the DoD, NASA and the Securities and Exchange Commission. The services it offers includes traffic management and content delivery, website acceleration, HD streaming, storage and DNS security.

Akamai is one of 11 cloud service providers which have, to date, been awarded Federal Risk and Authorization Management Program (FedRAMP) approval. FedRAMP is a US government-wide program that standardizes the approach to security assessment, authorization and continuous monitoring for cloud products and services. Other companies that hold FedRAMP accreditation include AWS, AT&T, HP, IBM, Oracle, Lockheed Martin and Microsoft. The latter’s Azure public cloud service received FedRAMP accreditation last September. This accreditation will be extended to Microsoft’s new government cloud once it becomes operational next year.

The FedRAMP accreditation awarded to AWS in May 2013 is thought to have subsequently helped beat IBM to win a ten-year US$600m cloud computing contract with the Central Intelligence Agency (CIA). Some have described this contract win as a watershed moment which marks the start of a competitive and dynamic market for government cloud services. AWS will build a version of its public cloud inside the CIA’s data centers and this will operate as a private cloud.

AWS first announced the launch of its public GovCloud offering in 2011. However, AWS’ focus on the market for private cloud services makes sense, given how busy the market for public cloud services has since become. In addition, there are major opportunities for private cloud service providers to win lucrative business from government institutions – if they get their strategies right.

Although private cloud investments by government agencies will rise more rapidly, public cloud services will continue to be important for web hosting and low-risk data storage. There is also a growing market among federal government institutions for hybrid cloud environments which combine private and public architectures.