Barry Whittle - March 22, 2019

Cloud spend makes up only 2% of Federal Agency's IT spend

 

According to Apptio’s analysis of publicly available spending data, US federal agencies are on average dedicating less than two percent of its IT spend on cloud. This contrasts with private sector organizations who are allocating up to 30%. With cloud adoption rates increasing every year, federal agencies have an opportunity to lock in a cloud adoption strategy ready for the day when cloud solutions become as pervasive in the federal space as they are in the private sector.

Federal agencies relatively small cloud footprint is a greenfield opportunity for thoughtful and efficient cloud adoption that avoids the mistakes of cloud early-adopters. Many private sector organizations adopted Cloud 1.0 solutions (e.g., cloud compute as a like-for-like replacement of bare-metal servers) and got their fingers burned with cloud sprawl and out of control spending. Federal agencies can’t afford to make those same mistakes. Apptio Federal Insights unifies and analyzes federal technology spend to support Cloud 2.0 adoption and drive digital transformation.

According to Apptio’s analysis, key trends in federal technology spending include:

Federal agency cloud spending is well below private-sector averages. According to the 2018 IDG Cloud Computing study, private sector companies allocated 30 percent of IT budgets to the cloud in 2018. Based on Apptio’s analysis, spending in federal agencies falls far below that at average, representing two percent of all costs. The Small Business Administration is the highest agency spender on cloud at 7% of their budget, while the Department of Energy and Labor are coming in at only 0.1% of spend.

Vendors are driving technology spending. The Apptio analysis also reveals that more than $2.5 billion of the technology spend is tied to specific IT vendors. The highest vendor contract in 2018 was awarded to Insight Public Sector, totaling more than $624 million across 35 agencies with services provided by multiple vendors. Microsoft alone accounts for almost $1.3 billion across all contracts, with $113 million dedicated to Adobe.

Introducing Apptio Federal Insights

Designed specifically for IT and finance leaders at federal agencies, Apptio Federal Insights applies machine-learning to publicly available data sets including the Federal Procurement Data System sourced through USASpending.Gov, FedScope, and the Federal IT Dashboard. Apptio’s analysis delivers a 360-degree financial view of an agency’s historic technology spending.

“Because many agencies are using tools and processes that are not purpose-built to manage the complexity of IT, there is an excessive amount of unvalidated data throughout federal agencies,” said Bob Carter, VP of Public Sector and Operations at Apptio. “That is why it is crucial for agencies to apply a set of foundational rules through TBM and Apptio to gain insights, validate data and support their digital transformation journey while making strategic business decisions.” Apptio Federal Insights delivers:

  • Increased visibility. A unified view of consolidated vendor spend, including cloud providers and applications, or shadow IT spend along with benchmarks across different, disparate federal agencies.
  • Data-driven decisions. Uncover defensible insights to understand where IT dollars are truly being spent. With these insights, federal agencies can then retire applications and reallocate spend to other investments like cloud.
  • Automated solutions. Realize the value of an automated Technology Business Management (TBM) solution backed by the industry’s only standard taxonomy. Users can also simplify compliance with the Office of Management and Budget’s request for TBM adoption by 2019.
  • Mission success. Avoid the risk of duplication and waste by aligning resources to mission goals and modernize the approach to IT so the agency can deliver services to citizens and organizations more efficiently and cost-effectively.

“Apptio’s decision to build a readily accessible free application, using publicly available data, will give federal agencies tremendous insight into where their IT dollars are being spent,” said Adam Mcllwain, Senior Manager of SIE Consulting Group. “As a strong proponent of the TBM taxonomy, SIE Consulting Group has consistently fought to help our federal customers modernize their technology infrastructures. Using sophisticated machine learning capabilities, Apptio’s investment in this analytics tool will kickstart agencies pursuing TBM implementation and accelerate the tremendous benefits of achieving robust cost transparency.”

“Because many agencies are using tools and processes that are not purpose-built to manage the complexity of IT, there is an excessive amount of unvalidated data throughout federal agencies,” said Bob Carter, VP of Public Sector and Operations at Apptio. “That is why it is crucial for agencies to apply a set of foundational rules through TBM and Apptio to gain insights, validate data and support their digital transformation journey while making strategic business decisions.”

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