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The True Cost of FedRAMP: What Every ISV Needs to Know Before Pursuing Authorization

February 11, 2025

For Independent Software Vendors (ISVs) aiming to enter the federal market, FedRAMP authorization is a crucial step. However, before diving into this compliance journey, it’s essential to understand the financial investment required. Through my experience working with various ISVs, I’ve identified two primary categories of FedRAMP costs: Initial Costs and Operational Costs.

Each of these costs can be further broken down into four key elements:

  1. People
  2. Technology & Remediation
  3. Documentation
  4. Assessments

Understanding these costs will help you make an informed decision about whether FedRAMP is the right move for your business and how to structure your compliance strategy effectively.

Initial Costs: Pre-Authorization Expenses

Initial costs cover everything required before you achieve an Authority to Operate (ATO). This includes designing a compliant system, hiring the right personnel, conducting assessments, and preparing documentation. Here’s a detailed breakdown:

People

To properly support a FedRAMP-compliant environment, you need a dedicated team. Key roles include:

  • Information System Security Officer (ISSO)
  • Information System Owner (ISO)
  • Security Engineer / System Administrator
  • DevOps Engineer
  • Security Operations Center (SOC) Analysts
  • Compliance Subject Matter Expert

For smaller companies, hiring a full team may not be feasible. Some roles can overlap, and certain tasks, such as SOC monitoring and compliance SMEs, can be outsourced. The main cost consideration here is whether you need to hire new staff, train existing employees, or outsource specific functions.

Technology & Remediation Efforts

A FedRAMP gap assessment will reveal areas where your current environment falls short of compliance requirements. Common technology investments include:

  • Security Information and Event Management (SIEM)
  • File Integrity Monitoring (FIM)
  • Antivirus (AV) and Endpoint Protection
  • Network Intrusion Detection & Prevention Systems (NIDS/NIPS)
  • Secure cloud hosting (e.g., AWS GovCloud, Azure Government, or Google Cloud for Government)
  • Encryption upgrades
  • Hardened system images

Technology costs include but not limited to:

  1. Software Licenses & Subscriptions – Varies based on solutions chosen
  2. Installation & Configuration Costs – Internal or external resource costs
  3. Training Costs – Ensuring staff can manage new tools effectively
Documentation

FedRAMP documentation is extensive and can be one of the most time-consuming parts of the process. Organizations have three options:

  1. Write documentation in-house – Requires deep expertise and significant time.
  2. Use pre-built templates – Cost-effective but requires customization.
  3. Hire a consulting firm – The fastest and most efficient approach but also the most expensive.

Estimated Documentation Costs:

📌 $100K – $300K, depending on the complexity and whether external consultants are involved.

Assessments

Assessments play a key role in achieving FedRAMP authorization. The three main types of assessments include:

  • Gap Assessment: Identifies security and compliance gaps before major remediation efforts.
    • Estimated Cost: $30K – $60K
  • Readiness Assessment: (Previously mandatory for JAB ATOs, now optional for Agency ATOs)
    • Estimated Cost: $55K – $75K
  • Initial Security Control Assessment (SCA): Conducted by a Third-Party Assessment Organization (3PAO), includes full security control evaluations, vulnerability scanning, and penetration testing.
    • Estimated Cost: $175K – $275K, depending on system impact level (Moderate vs. High)

Operational Costs: Maintaining FedRAMP Compliance

Once FedRAMP authorization is achieved, companies must maintain compliance through continuous monitoring, annual assessments, and security updates. These costs include personnel retention, system upgrades, ongoing documentation updates, and regular assessments.

People

Maintaining compliance requires keeping key personnel onboard:

  • ISO & ISSO – Ensure continuous compliance and manage security operations.
  • Security Engineers & System Admins – Handle ongoing technical security requirements.
  • SOC Analysts – If not handled in-house, SOC monitoring must be outsourced.

📌 Personnel Retention Costs: Dependent on company size and outsourcing decisions.

Technology & Remediation

While no new major investments may be needed, the following ongoing costs should be considered:

  • Software license renewals
  • Infrastructure and hosting fees
  • Training for new employees on security tools
  • Unexpected remediation costs from annual assessments

📌 Reserve Budget: $20K – $30K for unforeseen remediation needs.

Documentation

Minimal updates are needed unless major system changes occur (e.g., moving from AWS to Azure, upgrading from FedRAMP Moderate to High, or implementing a new security framework like Rev 5).

📌 Major documentation updates required for:

  • Security framework upgrades
  • Hosting environment changes
  • Impact level modifications
Assessments & Continuous Monitoring

Ongoing assessments are mandatory to maintain FedRAMP compliance. These include:

  • Annual 3PAO Assessment: Full security review conducted yearly.
    • Estimated Cost: $90K – $160K
  • Continuous Monitoring (ConMon): Ongoing vulnerability management and reporting.
    • Can be outsourced or handled internally.
    • Estimated cost ranges between $70k – $120k.
  • Red Team Exercises: Cyberattack simulations to test security defenses.
    • Estimated Cost: $25K – $60K, depending on scope and duration.
Making an Informed Decision About FedRAMP

Understanding these costs is crucial for making the right business decision. Here’s why:

✅ Is FedRAMP the right fit for your business? – Weighing costs vs. federal market opportunities.

✅ Pricing Strategy – Ensuring your product is priced correctly for government contracts.

✅ Operational Strategy – Deciding whether to maintain separate environments for federal and commercial customers.

To accurately estimate your costs and compliance timeline, conducting a FedRAMP gap assessment should be your first step. By identifying potential gaps early, you can make strategic decisions about hiring, technology, documentation, and assessments, ensuring a smoother and more cost-effective FedRAMP journey.

FedRAMP compliance is a significant investment, but with proper planning and an informed strategy, companies can successfully navigate the process while controlling costs. If you’re considering FedRAMP and need guidance on cost-effective strategies, let’s connect. Schedule a consultation today and take the first step towards your FedRAMP authorization!