AWS Public Sector Blog

Three questions about cloud procurement for the public sector explained

Cloud technology is transforming the way organizations use data to make decisions, provide services to communities, and collaborate across departments and business processes. In a March 2022 survey of 147 state and local government leaders by the Center for Digital Government, more than half of respondents said they plan to procure citizen-facing applications and storage and backup infrastructure in the next one to two years. However, some public sector organizations are challenged by procurement. To help demystify the cloud procurement process, here are answers to three questions public sector procurement officials frequently ask about buying cloud.

1. How are cloud solutions different than legacy technology?

Traditional infrastructure is all about the equipment: servers, cables, etc. IT professionals develop a list of needed equipment and get a cost estimate for that equipment. This cost estimate would translate to a budget request, and when approved by the organization’s leadership, IT could turn a requisition into procurement. A contract—typically in the form of a purchase order—is issued, the equipment is ordered and shipped, and once the IT department confirmed receipt, the invoice is paid by accounts payable.

With cloud, the model is different. Rather than specifying a list of equipment to buy, IT departments work with cloud service providers (CSPs) to determine compute and storage requirements to run in the cloud. When demand increases, so does the allocation of services—without needing to buy and deploy additional on-premise equipment. And when demand decreases, cloud computing scales down as well so that you don’t pay for unused, excess capacity. Costs for cloud technology vary depending upon size and scale of usage. There is no up-front expense for equipment; rather, you pay as you go for what you use in any given time period. This provides important agility for public sector organizations as they scale services up or down to meet demand.

For instance, when peak demand hits during seasonal program registration, cloud technology can scale with the demand to meet performance needs. When registration is over and demand normalizes, the extra capacity scales back, too, so that you aren’t paying for extra capacity during slower periods of the year.

Various services, such as Amazon CloudWatch from Amazon Web Services (AWS), can help you monitor usage, provision additional capacity, and track demand. AWS Budgets allows you to monitor costs and budgets including enabling alarms when spending thresholds are met. These services support the best practice of establishing a “not-to-exceed” annual amount and allowing end users to procure against that as needed.

2. How are cloud solutions procured?

Cloud solutions can be procured directly from CSPs, like AWS, or indirectly through CSP partners, like those in the AWS Partner Network. Both options offer the ability to negotiate a contract directly with vendors, leverage an existing public sector cooperative contract, or, if necessary, issue a solicitation to the industry. It is important for business owners to work closely with their procurement official to define their objectives. A mutual understanding of objectives often decides whether a direct or indirect procurement is best for your organization.

If you are going to do a solicitation, the best practice is to use a method that allows for evaluation of CSP’s qualifications, ability to provide the necessary outcomes, pricing, and other relevant criteria. The cost evaluation should allow for flexibility over the term of the contract so that you can take advantage of the scalability and agility of cloud solutions. Additionally, the scope of work should be presented as a problem statement—allowing CSPs to propose a multi-faceted solution to address the problem. This helps you use the expertise of potential partners as you determine the best path forward.

Like with procurement of other common products and services, public sector customers can frequently take advantage of established cooperative contracts. This practice speeds the time to procure and alleviates the resources needed to support a procurement. Organizations, such as the National Association of State Procurement Officials (NASPO) ValuePoint, establish contracts via a lead or host agency that follows generally accepted public procurement best practices and specifies that the resulting contract is available to other public sector organizations. Cooperative contracts have the benefit of scale: because vendors know the contract is available nationally, they have greater incentive to provide best value proposals.

3. What is a software marketplace and what value can AWS Marketplace add?

A software marketplace is a curated digital catalog that helps customers find, subscribe to, deploy, and govern third-party software, data, and services. Last year alone, more than 325,000 customers subscribed to billions of dollars of software, data, and professional services from more than 2,000 sellers.

Public sector organizations need to balance extensive regulatory and compliance obligations with cost-effective procurement strategies. AWS Marketplace helps to simplify and streamline procurement for public sector organizations, enabling them to spend their budgets driving their missions forward rather than on administrative overhead.

AWS Marketplace offers the following features to improve your procurement experience:

Private offers. With private offers, you can negotiate custom pricing, payment schedules, and terms, like end-user license agreements (EULAs), for products in AWS Marketplace. This flexibility can help avoid lengthy procurement periods usually associated with custom terms.

Standard Contract for AWS Marketplace (SCMP). The SCMP is an accommodation between common EULA terms and the terms public sector customers redline most frequently. Using the SCMP allows you to alleviate lengthy negotiations and decrease time to contract.

Private Marketplace. Private Marketplace allows you to create a customized private catalog of preapproved products. Administrators can create unique sets of vetted software available in AWS Marketplace for different AWS accounts within their organization to purchase. Preapproval can help accelerate procurement.

Vendor Insights. This new feature helps streamline third-party software risk assessment by enabling sellers to make security and compliance information available through AWS Marketplace. Using Vendor Insights can help you reduce assessment lead time to a few hours by allowing access to the vendor’s validated security profile, saving months of effort back-and-forth with vendors.

Getting started procuring AWS

Find more resources about cloud procurement at How to Buy AWS Cloud for the Public Sector. Not sure where to begin? Read the six steps to cloud procurement readiness for government. Do you have more questions about how to procure AWS for your organization? Start a conversation with us today.

Download the AWS eBook, Cloud marketplaces: Accelerating and simplifying cloud procurement, to understand the potential of cloud marketplaces to expedite the cloud transformation of public sector procurement.

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