Report: Federal IT spending growth slowing, but still healthy

INPUT’s five-year “Federal IT Market Forecast” predicts that IT contract spending by the federal government will grow 4.1 percent annually over the next five years, from $71.9 billion in 2008 to $87.8 billion in 2013.

However, the report asserts, uncertainty about new administration priorities, the current economic downturn and the rapid growth in mandatory spending are among the factors that will hinder the flow of federal IT dollars. In addition, one of the effects of current spending on overseas conflicts is that it is crowding out total discretionary spending in the federal government budget, according to the report. 

The INPUT forecast analyzes IT spending by organizations within the three branches of the federal government, quasi-government agencies and the intelligence community.

Among the conclusions made in the INPUT report:

• Information sharing, the need for better IT management techniques and relatively flat employment levels are major drivers impacting federal IT spending.
  
• To achieve cost savings, agencies will move forward with IT infrastructure optimization and virtualization as well as consolidation.

The factors mentioned above, combined with increasing congressional scrutiny on budgets and performance, create an environment of “tempered momentum,” explained Richard Colven, who is vice president of industry analysis at INPUT.

“Although the anticipated growth rates are below the historical average, government’s increasing reliance on technology sustains momentum in IT spending, especially as it relates to increasing efficiency and reducing operational costs,” Colven said.

The INPUT report analyzed six industry segments, including outsourcing, software products, professional services, systems integration, communications and hardware. Colven told GovPro.com that INPUT sees two segments growing especially fast in the years ahead.

“As complexity increases in the federal government, and the government is looking more towards solutions-buying, we see professional services growing at a very high rate. And then, somewhat surprisingly, outsourcing is growing,” Colven said. “So that shows that federal agencies are doing one of two things: that they are hiring vendors to provide complete solutions, or they are outsourcing the capability altogether.”

Colven urges federal administrators to consider turning off old, legacy systems and reducing their agencies’ energy spending by shifting to green IT. 

“Every dollar an agency can save through an efficient modernization can be used for adding new technologies and making the organization work more efficiently,” Colven told GovPro.com.    

John Slye, principal analyst at INPUT, believes that IT investment is crucial to federal operations.

“The government’s ability to face its challenges in the coming years will hinge on its ability to develop, manage, share and secure a solid technology environment,” Slye asserted. “We expect federal agencies will be paying a lot of attention to their technology, even if only to figure out how to drive costs out of steady-state operations to free up funding for new work. The spending environment may seem gloomy, but in light of fiscal and economic conditions, IT spending growth remains healthy.”

For more details on the INPUT report, click here.