The State of Public Sector Cloud Spend

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Earlier this year, we released a report evaluating how actual public cloud spend changed in response to the COVID-19 pandemic and the multitude of other socioeconomic pressures of 2020. 

From the data, we uncovered trends in public cloud spend between the different types of cloud services (compute, containers, databases, storage, etc.), and also across different revenue segments (enterprises, mid-market, small businesses), global regions (North America, Asia Pacific, Europe and Middle East), and vertical industries. 

You can download the complete report to see all the insights we uncovered, but in this article, we’ll be focusing on how the public sector changed the way they used the cloud and the implications of this in 2021 and beyond.

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Report: How 2020 Changed the Way We Use the Cloud

How did cloud spend fluctuate in the public sector?

Cloud spending among public sector organizations grew quickly in the early months of the pandemic, with a 3.1% increase in March followed by a 10.8% increase in April. After slowed growth in the summer months, the public sector saw investment levels spike 16.9% in August and 19.6% in September. Compared to January, total cloud spend in the public sector was 53.5% higher in September.

This monthly volatility largely aligns with the same months during which schools were forced to shift to remote learning. For example, one CloudHealth customer that supports a digital learning platform reported launching new integrations with videoconferencing tools in a matter of days. Naturally, this required rapid scaling of public cloud infrastructure.

Educational institutions with systems embedded in the cloud were equipped to navigate this shift more easily. In a customer spotlight published by Microsoft, the CIO and Vice Chancellor for Technology for the University of Massachusetts Boston campus explained that their teams had integrated Microsoft Windows Virtual Desktop in 2019 as a less capital- and resource-intensive alternative to on-premises systems. Faced with the realities of COVID-19 in March 2020, the university accelerated this plan rapidly to support the transition to fully remote operations.1

Accelerated timelines for digital transformation projects reflected a trend across the education sector. In the 2021 Gartner CIO Survey, 73% of respondents in the higher education sector reported an increase in the “rate of new product/new service introduction” as a result of the COVID-19 pandemic.2

Beyond education, the shift to remote operations further fueled investment for cloud services in the public sector. State and local government agencies were tasked with deploying new virtual processes for standard day-to-day tasks, such as administering benefits, conducting remote courtroom proceedings, issuing identification and other documentation, and supporting public healthcare—all of which were further complicated by pandemic-related restrictions and an influx of benefits requests amid the economic crisis.

While government programs and other efforts have supported digital transformation for the public sector in recent years, the COVID-19 pandemic introduced new pressures that accelerated this transition.

Whitepaper
The State of Public Sector Cloud Management

How did the public sector allocate cloud budget?

Compute spend jumped 14% in February and would continue to grow slightly in March and April. After a consistent drop from May through August, compute spend would spike 17.2% as remote learning resumed in September.

The public sector also increased investment in containers by 70.9% from April to May, as the long-term nature of stay-at-home orders began to set in. After month-to-month fluctuation throughout the summer, container spend was 38.1% higher in September than in February.

The public sector is increasingly embracing cloud services to process large amounts of data more rapidly. The European Organization for Nuclear Research (CERN), which is famous for hosting the world’s largest particle accelerator—the Large Hadron Collider—has explained how Google Kubernetes Engine has helped to auto-scale infrastructure and streamline repetitive tasks for these purposes. To understand how the public cloud has impacted these processes, CERN repeated the analysis that led to the Nobel prize-winning discovery of the Higgs boson particle, which was initially conducted using largely on-premises systems in 2012 and took more than 24 hours to complete. When repeating this process using Google Cloud infrastructure, the analysis was completed in “just over five minutes.”3

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Key takeaways and numbers

  • The shift to remote learning aligns with monthly increases in cloud spend
  • There was a sudden need to enable remote work for government employees and support data processing related to government healthcare and economic programs
  • There was a 14.2% increase in compute services, the largest increase among verticals tracked in the data from the report
  • There was a 49.4% increase in spend on analytics services
  • A 49.6% increase in networking and content delivery services
  • And a 38.1% increase in containers from February to September

Implications for public sector organizations in 2021

Cloud financial management, also referred to as "FinOps," is critical for public sector organizations, whether to maximize efficiency while scaling infrastructure or to cut costs amid financial pressure and strict budgets. Beyond leveraging discount pricing options and other cloud cost optimization measures, cloud financial management entails creating KPIs in line with profitability and other business performance metrics, implementing policies to achieve those KPIs, and incorporating automation to ensure adherence to those policies.

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Building a Successful Cloud Financial Management Practice

Rising container usage can introduce a number of unique cloud financial management challenges, such as establishing standards for consistent labeling, identifying unnecessary cost drivers, and allocating usage to the appropriate cost centers. Even those with mature cloud financial management processes may need to account for the nuances of containerized workloads.

Whitepaper
FinOps for Kubernetes: Unpacking Container Cost Allocation and Optimization

We’re not the only ones keeping track of how public cloud usage is growing. Attackers are increasingly looking for configuration errors to exploit as usage becomes distributed and more critical workloads move to the cloud. In fact, cloud misconfigurations were identified as one of the two leading causes of malicious data breaches analyzed by The Ponemon Institute for IBM Security’s 2020 Cost of a Data Breach report.

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7 Best Practices for Cloud Security Posture Management

Organizations that ramped cloud usage in 2020 will need to ensure their operational processes and governance policies adapt accordingly. The decentralized nature and rapid scale of cloud-based infrastructure often render policies for on-premises workloads obsolete. Without visibility into how cloud resources are being used, many of these organizations will struggle to establish configuration standards, improve developer productivity, and maintain compliance with regulatory standards.

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Building a Successful Cloud Operations and Governance Practice

For more information and cloud management best practices for the public sector, see our complete whitepaper here: The State of Public Sector Cloud Management

1. Microsoft Customer Story: UMass Boston’s remote learning transformation prepared its students and faculty continue learning through the COVID-19 crisis. Microsoft.

2. Gartner, 2021 CIO Agenda: A Higher Education Perspective, Jan-Martin Lowendahl, Published 1 December 2020 - ID G00722433

3. Google Cloud Customer Story: Helping researchers at CERN to analyze powerful data and uncover the secrets of our universe. Google Cloud. 

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Lauren van der Vaart, Senior Content Marketing Specialist

Lauren is a member of the Digital Marketing team at CloudHealth by VMware. She focuses on delivering valuable, relevant, and actionable content for customers on their cloud journey. Before joining CloudHealth, Lauren held various roles across digital and field marketing for global technology organizations.

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