Obama Budget Spells Benefits for the Cloud

Quick, what spends almost $80 billion on information technology, likes the cloud, and is red white and blue all over? Yup, it’s the federal government, and in President Obama’s budget announced yesterday, the feds may have opened a window of opportunity for cloud computing companies both large and small hoping for some government largess.

The feds want to increase spending on IT in 2011 by 1.2 percent, to $79.4 billion, and to use the dollars to transform the way the government’s IT runs. Considering that about 70 percent of the current budget goes to keeping the existing gear running, that’s not a lot of overhead for innovation. The government fiscal year ends at the end of September so the money would start to trickle out after Oct. 1, 2010, for projects including cloud computing, cyber security, procurement and performance management.

Cloud computing is the most exciting as it could make government IT more efficient, something our readers have called on the feds to do. There are opportunities that could benefit Salesforce.com (S crm), Google (s goog), Microsoft (s Msft), Amazon (s amzn) and others. Back in September 2009, federal CIO Vivek Kundra announced a trial program that will be expanded across the government in 2011. The program allows federal agencies to buy IT services through a government portal from companies such as Google, (s goog) Salesforce.com (s crm), Scribd, SlideShare and others. It’s possible that smaller companies could benefit as much as larger ones through such a system. Plus the government can legitimize the cloud and provides a large buyer that should force vendors to implement interoperability and openness standards that the cloud so desperately needs.

There are also plans for data center consolidation, which will benefit server makers such as Dell (s dell), HP (s hpq), IBM (s ibm) and perhaps even SGI, as well as providers that deploy software and services to help manage hypervisors. The government  had more than 1,100 data centers in 2009, up from a still huge 432 data centers back in 1998. Despite the sprawl, things are not getting more efficient. Look at the issues federal officials have sharing data across different agencies and databases.

There’s also $364 million for the operations of the Department of Homeland Security’s National Cyber Security Division, which may become more politically important as tales of Chinese hacking continue to percolate, as well as from placing more critical information and infrastructure online.

Other than these data center and cloud-focused priorities there is plenty of room for technology in the budget, as Larry Dignan points out over at ZDNet. And for those of us looking at the government’s role in telecommunications, the Federal Communications Commission got a slight boost with a proposed annual budget of $352.5 million. I wonder if that means Chairman Julius Genachowski can afford gadgets for the hoped-for new technology lending library he talked about during his visit to our offices last month?