FedRAMP, GCC High, and CMMC: Cloud Compliance for NC Defense Contractors

North Carolina defense contractors must use FedRAMP-authorized cloud services when processing, storing, or transmitting Controlled Unclassified Information (CUI) to meet CMMC Level 2 requirements. Microsoft 365 GCC High, Azure Government, and AWS GovCloud are the primary options, with GCC High licensing costing approximately 50-100% more than commercial Microsoft 365 depending on the license tier.

Key takeaway: According to ICS Data's GCC vs. GCC High analysis, GCC meets baseline federal requirements (FedRAMP Moderate) while GCC High supports stricter regulations including FedRAMP High, DFARS/CMMC, and ITAR compliance. Azure Government servers used by GCC High are isolated both physically and virtually for sole use by federal agencies and contractors, with data transmission and processing occurring only in the continental US. This physical and logical separation is what makes GCC High compliant for CUI and ITAR data.

For defense contractors across North Carolina's Piedmont Triad, Charlotte, and Research Triangle, understanding which cloud tier your contracts require prevents both overspending on unnecessary compliance and underinvesting in inadequate platforms. With CMMC Phase 1 enforcement beginning November 2025, cloud compliance decisions must be made now.

Need cloud compliance guidance for your NC defense contracts? Preferred Data Corporation provides cloud solutions and CMMC consulting for North Carolina defense contractors. With 37+ years of expertise and BBB A+ accreditation, we match your cloud investment to your compliance requirements. Call (336) 886-3282 or schedule a consultation.

Understanding the Cloud Compliance Tiers

Tier 1: Commercial Cloud (Not Compliant for CUI)

Standard Microsoft 365, Azure, and AWS commercial environments are not authorized for CUI handling. According to V2 Systems' compliance guide, Microsoft 365 Commercial no longer supports FedRAMP following a December 2023 DoD memorandum on FedRAMP Moderate Equivalency.

Use for: Non-sensitive business operations, general office productivity Not appropriate for: Any data subject to DFARS 7012, CMMC, or ITAR

Tier 2: Microsoft 365 GCC (FedRAMP Moderate)

Government Community Cloud meets FedRAMP Moderate authorization and resides in Azure Commercial data centers with logical separation from commercial tenants.

Use for: Federal Contract Information (FCI), state/local government work Appropriate CMMC level: Level 1 (self-assessment for FCI only) Cost premium: Minimal (5-15% over commercial) Key limitation: NOT sufficient for CUI handling under CMMC Level 2

Tier 3: Microsoft 365 GCC High (FedRAMP High)

GCC High is hosted in Azure Government, a physically and logically isolated cloud environment operated only by screened US citizens.

Use for: Controlled Unclassified Information (CUI), ITAR-controlled data Appropriate CMMC level: Level 2 (required for CUI handling) Cost premium: 50-100% over commercial licenses Key advantage: Meets DFARS 7012, CMMC Level 2, and ITAR requirements

Tier 4: Microsoft 365 DoD / AWS GovCloud (Secret)

The highest commercially available tier, meeting Impact Level 5 (DoD) security requirements.

Use for: DoD-specific workloads requiring IL5 authorization Cost premium: Highest tier, available only to DoD entities and their contractors Key limitation: Most NC defense contractors do not require this level

GCC High: What NC Contractors Need to Know

Pricing Reality

According to ECF Data's pricing analysis, GCC High licensing is the most complex in the Microsoft ecosystem, often leading to overspending, with some contractors paying 18-27% more than necessary due to license confusion and overly broad compliance scope.

Representative pricing (per user/month):

Cost reduction strategies:

According to Kiteworks' analysis, organizations can reduce costs by keeping users who do not handle CUI on commercial or standard GCC licenses, shrinking the GCC High footprint and reducing total annual license spend.

Feature Availability Gap

Organizations pay more for GCC High but often receive features later. New Microsoft capabilities typically arrive in commercial Microsoft 365 first, with GCC High availability following months later. Microsoft Copilot, for example, reached GCC High in late 2025, with some capabilities continuing to roll out into 2026.

Current feature limitations in GCC High:

• Some third-party app integrations unavailable
• Power Platform capabilities may lag commercial
• Certain Teams features delayed
• Some security and compliance tools arrive later

Minimum License Requirements

Historically, Microsoft required 500 licenses minimum for GCC High. However, Microsoft 365 Business Premium for GCC High now provides a lower-cost entry point for organizations with fewer seats, making compliance achievable for smaller Piedmont Triad defense contractors.

AWS GovCloud as an Alternative

For North Carolina defense contractors whose workloads are not primarily Microsoft-based, AWS GovCloud provides FedRAMP High-authorized infrastructure.

AWS GovCloud features:

• Isolated AWS regions operated by US citizens with security clearances
• FedRAMP High and DoD IL2/4/5 authorized
• All standard AWS services available in the GovCloud partition
• Supports ITAR, DFARS, and CMMC compliance requirements
• Pay-as-you-go pricing (no per-seat licensing model)

Best for NC contractors who:

• Run custom applications on AWS infrastructure
• Need IaaS/PaaS rather than SaaS compliance
• Have development teams building DoD applications
• Want infrastructure flexibility beyond Microsoft ecosystem

Cost comparison with commercial AWS: GovCloud services typically cost 5-25% more than commercial equivalents, significantly less premium than GCC High vs. commercial Microsoft 365.

Azure Government

For contractors needing both Microsoft SaaS (GCC High) and IaaS/PaaS capabilities, Azure Government provides the infrastructure layer.

Azure Government capabilities:

• Physical isolation in US-only data centers
• FedRAMP High and DoD IL4/5 authorization
• Same Azure services as commercial with compliance controls
• Integration with GCC High for unified identity and security
• Dedicated Azure Active Directory for government tenants

Common use cases for NC manufacturers:

• Hosting custom DoD applications and portals
• Running compliant databases for CUI data
• Deploying virtual desktop infrastructure (VDI) for CUI access
• Hosting development and test environments for defense projects

Migration Considerations for NC Defense Contractors

Assessment Phase: What Cloud Do You Need?

Before migrating, determine your actual requirements:

1. Identify CUI scope: Which data is CUI vs. FCI vs. general business?
2. Count CUI users: How many people actually handle CUI regularly?
3. Map data flows: Where does CUI originate, get processed, and get stored?
4. Evaluate applications: Which business applications handle CUI?
5. Consider enclave approach: Can you limit GCC High to a subset of users?

NC-specific example: A 100-person manufacturer in Greensboro with 15 engineers handling CUI might only need 15-20 GCC High licenses while keeping 80+ employees on commercial Microsoft 365, saving $50,000+ annually.

Migration Planning

Typical migration timeline: 3-6 months for straightforward email/file migrations; 6-12 months for complex environments with custom applications.

Migration steps:

1. Establish GCC High tenant and configure security policies
2. Set up identity management (Azure AD for GCC High)
3. Migrate email (Exchange Online in GCC High)
4. Migrate files (SharePoint/OneDrive in GCC High)
5. Configure Teams for secure collaboration
6. Deploy Intune for device management
7. Train users on any workflow differences
8. Validate compliance controls and documentation

Common Migration Challenges

• Data separation: Ensuring CUI and commercial data do not cross tenant boundaries
• Third-party apps: Many commercial integrations do not support GCC High
• User training: Different tenant means different login, potentially different workflows
• Coexistence: Managing two Microsoft tenants simultaneously increases complexity
• Mail routing: Proper mail flow between GCC High and commercial tenants

Ready to migrate to compliant cloud? Preferred Data Corporation manages cloud migrations to GCC High and government cloud platforms for North Carolina defense contractors. Call (336) 886-3282 or start your migration planning.

Cost Optimization Strategies

Strategy 1: Minimize GCC High Seat Count

Only license users who actually handle CUI in GCC High. According to ECF Data's analysis, proper scoping can save 18-27% of total licensing costs.

Strategy 2: Use Appropriate License Tiers

Not every CUI user needs E5. Match license tiers to actual user needs:

• Engineers creating CUI documents: E3 or E5
• Administrators referencing CUI occasionally: Business Premium
• Shop floor workers scanning CUI documents: F1/F3

Strategy 3: Consider Hybrid Approaches

Combine GCC High for email/collaboration with alternative solutions for specific workloads:

• Use Kiteworks or PreVeil for CUI file sharing (potentially lower cost than full GCC High)
• Host custom applications in AWS GovCloud if already AWS-invested
• Consider CMMC enclave strategies that limit cloud compliance scope

Strategy 4: Annual Licensing and Commitments

Microsoft offers pricing benefits for annual commitments vs. month-to-month. Work with a licensing specialist to optimize your agreement, particularly for larger Piedmont Triad or Charlotte defense operations.

CMMC and Cloud: Compliance Requirements

For CMMC Level 2 certification, your cloud environment must satisfy specific controls from NIST SP 800-171:

Access Control (AC): MFA, session controls, remote access encryption Audit and Accountability (AU): Logging all CUI access and modifications Configuration Management (CM): Baseline configurations, change management Identification and Authentication (IA): Strong authentication, password policies System and Communications Protection (SC): Encryption in transit and at rest System and Information Integrity (SI): Malware protection, security monitoring

GCC High inherits many of these controls from Microsoft's FedRAMP High authorization, reducing the number of controls you must implement yourself. However, you are still responsible for configuring the environment correctly and maintaining operational compliance.

Choosing Between Cloud Options: Decision Framework

Frequently Asked Questions

Do I need GCC High for all employees or just those handling CUI?

Only users who process, store, or transmit CUI need GCC High licenses. General business users who never interact with CUI can remain on commercial Microsoft 365 or standard GCC. This CMMC enclave approach to cloud licensing is the most cost-effective strategy for most North Carolina defense contractors, particularly smaller manufacturers in the Piedmont Triad where only a subset of employees handle defense-related work.

Can I use Google Workspace instead of Microsoft 365 for CMMC compliance?

Google Workspace does not currently offer a FedRAMP High-authorized tier equivalent to GCC High. Google's commercial offerings do not meet CMMC Level 2 requirements for CUI handling. If your organization uses Google Workspace for general business, you would need a separate compliant environment (GCC High, AWS GovCloud, or other FedRAMP High solution) specifically for CUI handling.

How long does migration to GCC High take?

For a straightforward migration (email, files, basic collaboration) for 20-50 users, expect 3-4 months from planning through completion. Complex migrations involving custom applications, multiple data sources, or large data volumes can take 6-12 months. Start planning well before your CMMC assessment date, as assessors will verify your cloud environment meets FedRAMP requirements.

What happens to existing data when we migrate to GCC High?

Data must be explicitly migrated from commercial to GCC High tenants; there is no automatic synchronization. Plan for data migration, including email archives, SharePoint content, and OneDrive files. Post-migration, ensure no CUI remains in the commercial environment. This data separation is a key CMMC compliance requirement that assessors will verify.

Is GCC High worth the cost for a small NC defense contractor?

For contractors handling CUI, GCC High is essentially mandatory for CMMC Level 2 compliance when using Microsoft cloud services. The cost premium is a necessary business expense for maintaining DoD contract eligibility. However, minimizing the number of GCC High seats through proper scoping and enclave strategies can make the cost manageable even for 10-20 person shops in the Piedmont Triad.

Navigate Cloud Compliance with PDC

Preferred Data Corporation has served North Carolina businesses for over 37 years from our High Point headquarters. Our BBB A+ rated team helps defense contractors across the Piedmont Triad, Charlotte, and Fayetteville area navigate cloud compliance requirements and implement cost-effective solutions.

Our cloud compliance services include:

• Cloud compliance assessment and scoping
• GCC High tenant setup and configuration
• Cloud migration to government-authorized platforms
• CMMC compliance consulting and implementation
• Ongoing managed IT services for compliant environments
• Cost optimization and license management
• On-site support within 200 miles of High Point

Get cloud compliance right the first time. Call Preferred Data Corporation at (336) 886-3282 or request a cloud compliance assessment. We will help you choose the right cloud tier, minimize costs, and achieve CMMC certification for your North Carolina defense contracts.