State CIOs have moved into the next phase of transitioning to cloud computing. They’re no longer just thinking about it. They’re actually doing it.
The National Association of State Chief Information Officers (NASCIO) released a survey in September 2014 highlighting the rapid rate of adoption of cloud services in state government. In 2013, 22% of CIOs described themselves as “still investigating” cloud services and just 6% of CIOs said their states were “highly invested” in cloud-based services. By 2014, only 6% described themselves as still investigating with 20% now highly invested – indicating a major shift from investigation to investment over the 12 month period.
Onvia’s Project Center revealed that outside of the federal government, state agencies lead the way in soliciting work related to cloud computing. Out of the 440 bid requests and requests for proposals (RFPs) since 2013, 76% came from state agencies. County government sent out 22% and cities and towns published 17%.
Example In June 2014, the City of Houston, Texas, awarded a $4.1 million contract to Dyonyx LP for electronic plan review software, cloud computing services, professional services, maintenance and support for its Department of Public Works and Engineering.
State agencies with the largest budgets are obvious front-runners. California is at the top, releasing 21% of bids and RFPs, and the public entities around its capital, Sacramento, lead the county and city sectors.
Texas, Florida and Illinois follow the Golden State. The three make up 22% of the bids and RFPs in the last two years.
Managed Services and the Cloud
NASCIO’s survey also found CIOs are moving to cloud-based managed services, or plan to in the near future. In 2015, 86.1% of state CIOs are contemplating sourcing managed services through the use of applications running on a cloud-infrastructure environment.
Based on data from Onvia’s Project Center, state and local governments opened 881 bids and requests for proposals for managed services since February 2013. State agencies released 71% of those solicitations.
Example The Illinois Department of Public Health awarded Integrated Solutions Group, Inc., a one-year, $285,000 contract to support a cloud-based system that provides the necessary structure to ensure compliance with existing and new Federal requirements of 96 local health departments and 156 hospitals in the Hospital Preparedness Program. The contract is active through June 2015.
Get in the Door
To get in the door at any level of government, executives at companies with relatively small annual revenues should not discredit themselves from winning cloud-computing contracts. Size makes no difference. Larger companies will aim their resources to the larger contracts. Yet, according to Onvia’s “Tactics to Win in the State & Local Cloud Market,” only 10% of contract awards in recent years went to companies with annual revenues of more than $1 billion. Smaller vendors can tap into the state level of government for contracts; they are not relegated to work just with cities and counties.
Just as a vendor’s annual revenue doesn’t dictate contracting opportunities, state and local governments don’t lean toward companies with a certain characteristic, such as size or experience. State agencies have awarded contracts to different size companies and those with broad services as well as specialties. While giants like Microsoft that cover a wide swath of competencies have been awarded, other specialized contractors such as software developers, Software as a Service (SaaS) providers, and value added resellers (VARs) are also winning.
According to Onvia’s Term Contract Center, smaller contracts may be state CIOs’ preferred avenue. Since 2014, cloud computing and managed services contract awards were valued between $100,000 and $5 million. In the 2014 NASCIO survey, state CIOs said they are opting for contracts with lower dollar value and shorter terms, because those types of contracts give them more agility. A single, massive contract is harder to manage than two smaller contracts. More importantly, the big contracts often fall behind schedule and are more likely to fail.
Example The Kentucky Cabinet for Health and Family Services, an agency that offers human services and health care programs, awarded Dude Solutions, Inc. a one-year, $3,000 contract for cloud computing services. The contract is active through October 2015.
Opportunity Awaits for Cloud Vendors of All Sizes
Cloud computing is a new and evolving field, and vendor experience is not a luxury for agency decision makers to set as a standard. Onvia’s research shows officials many times have awarded contracts to companies with a single government award in their past. In other words, there is no one-size-fits-all approach for vendors looking to enter into the expanding public sector cloud computing market.
In one year, state CIOs have turned away from merely observing what the cloud could do for their agencies. State agencies have released 76% of outstanding solicitations for cloud business, they now are ready to move into the cloud and set up the infrastructure. This shift in thinking will open the market for all types and sizes of companies to compete for contracts.
State and local government contractors should also note that cities are increasingly looking to innovative solutions to solve their problems, presenting more opportunities to compete for contracts. Learn how cities are getting innovative here.