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The government sector is well into its digital transformation and cloud—public, private, hybrid—plays a major role. On average, across all industries, companies spend 20.4% of their IT budgets on cloud, national governments today spend 22% and local governments 20.6%. The global government cloud market was valued at ~$21 billion in 2017, and is expected to grow at a CAGR of 15.4% between 2018 and 2023. Public cloud is the single largest deployment model, accounting for ~$7.7 billion in 2017 and expected to exceed $17.8 billion by 2023.
The two leading cloud providers, AWS and Microsoft Azure, have long recognized the potential of the government sector and both have extensive government clouds that address the unique security and other regulatory requirements of public sector IT. This blog post explores the value that the government sector is extracting from the cloud, illustrated by a number of real-life success stories.
Government Cloud Adoption: Drivers and Constraints
The government sector is embracing the cloud for many of the same reasons as for-profit organizations:
In recognition of these benefits, national governments across the globe are allocating funds and resources to drive cloud adoption among government agencies. In the U.S., for example, Congress passed the Modernizing Government Technology Act of 2017, which established a $500-million Technology Modernization Fund to improve IT and enhance cybersecurity across the federal government, including to “…transition legacy information technology systems to cloud computing…” Similarly, the European Union has created the Euro Cloud as a pan-European cloud innovation hub, and Japan has built the Kasumigaseki Cloud to better integrate information resources across government agencies.
However, despite all the forces and resources that are driving government cloud growth, there are constraining factors as well:
The usual problems associated with trying to introduce innovation into bureaucratic, hierarchical organizations. Changing government organizational culture, with its multilevel decision-making and long policy timelines, is a slow and organic process. Somewhat related to the first point, government agencies often find it difficult to attract cloud talent from the private sector.
Concerns about vendor lock-in relative to the public cloud providers.
Perhaps the greatest constraint to government cloud adoption, however, is the sensitive nature of government data and the perception that on-premises is more secure/private than cloud. For this reason Gartner predicts that governments will implement private cloud at twice the rate of public cloud through 2021, with the problem being that government private clouds tend to be advanced virtualization only, without the full characteristics and benefits of the cloud.
G-Cloud and other Managed Services
Both AWS and Microsoft have developed infrastructures and programs to lure government customers.
AWS offers cloud computing services especially tailored to the security and compliance needs of the U.S. federal government and its various agencies. These infrastructures and services are fully compliant with FedRAMP—the Federal Risk and Authorization Management Program that assesses, authorizes, and monitors cloud products and services for the federal government. Its AWS GovCloud (U.S.), for example, is an isolated AWS region designed to host highly sensitive workloads such as for the Department of Defense and law enforcement agencies. Since 2014, it has offered Commercial Cloud Services (C2S) to the intelligence community (IC) and, as of Q4 2017, the AWS Secret Region has been available for the exclusive use of its C2S IC customers.
AWS is also an active participant in the U.K. government’s G-Cloud streamlined cloud-service procurement program.
The Microsoft Cloud for Government includes Azure Government, Microsoft 365 for U.S. government, and Dynamics 365 CRM Online Government—all of which support more than 72 compliance frameworks. In March of this year, Microsoft announced an expansion of its government cloud offerings, with an extension of the Azure stack to on-premises environments and greater security and compliance for Dynamics 365. Microsoft has eight dedicated government regions, which offer three tiers of government cloud services: Government Community Cloud (GCC) for state, local, and federal agencies; GCC High for government customers handling more sensitive activities; and DoD Cloud, specifically for the Department of Defense.
There’s nothing like real-life success stories to understand the benefits that government agencies at all levels are finding in the cloud.
National governments typically see the cloud as their long-term pathway to strategic IT modernization for their agencies. The following are some randomly selected examples of U.S. federal agencies in the cloud:
Local governments are particularly well positioned to benefit from cloud economics and efficiencies in the face of shrinking budgets and rising expectations for digital engagement as millennials become the dominant demographic group. Here are some selected case studies from the U.K. and the U.S.:
Looking Ahead: Government Cloud Trends
There are many opportunities for growth in the government cloud sector. In a 2017 Gartner survey of 450+ government CIOs across 98 countries, digital transformation was ranked as the top business priority, with 19% planning on increasing their spending on cloud services during the coming year.
Previous constraining factors such as concerns for data security and privacy are weakening as the public cloud providers continue to invest in successfully hardening their security and privacy profiles. And there are more and more case studies that clearly quantify the cost savings and operational efficiencies that are gained when migrating government services to the cloud.
Geographically, government cloud initiatives are particularly strong in the APAC region, where governments are playing catch-up in terms of e-government services. As far as offerings are concerned, SaaS is currently the biggest contributor to revenues generated by the government cloud sector and this trend towards holistic, fully managed solutions is expected to continue. With so many large corporations active in the government sector, SaaS evens the playing field for innovative startups bringing cloud-based solutions to the government sector.
In short, just as a rising tide raises all ships, the growth of cloud adoption in general will deepen the impact of cloud computing in the government sector, for the benefit of policymakers, civil servants, and citizens alike.