Forecast: Fed computer system spending to exceed $18 billion

Federal government spending on computer systems will increase at a compound annual growth rate of 9 percent, from $12 billion in fiscal 2002 to more than $18 billion in 2007, according to a report released Sept. 12 by Input Inc., a Chantilly, Va., market research and consulting company.


"The server segment will experience the strongest growth over the forecast period, increasing at a compound annual growth rate of 10 percent," said Payton Smith, manager of public-sector market analysis services at Input. "An increased emphasis on information sharing between agencies and the development of network-centric warfare capabilities in the Department of Defense will contribute to the growth of the server segment."


The General Services Administration's Information Technology Schedule accounted for more than 45 percent of computer equipment sales in the federal government during 2001, according to the report. Purchase of IT equipment on the GSA schedule has increased nearly 100 percent since fiscal 1997, due in large part to procurement reforms in the mid-1990s, the report showed.


Despite the growth in sales on the schedule, the report advised that large outsourcing contracts have the potential to significantly change market dynamics in the federal government.


"While requirements for computer systems are certainly not diminishing, federal vendors should be prepared to offer new systems as part of service contracts in addition to traditional capital purchases," Smith said.


The impact of outsourcing on the computer systems market in the federal government will depend on the success of existing programs, such as the Navy Marine Corps Intranet project, the report said.