Report: IT spending continues strong growth

While Congress has not yet completed its appropriations work for fiscal 2004, one market research firm believes the upcoming year is going to be a strong one for information technology and technology-based services.

The IT portion of the president's budget request for fiscal 2004 totaled $59.3 billion, but Federal Sources Inc. of McLean estimates that spending on technology actually will come in at $62.5 billion.

FSI is projecting increased spending for homeland security, information security and network-based services, and a shift of existing funds as agencies begin to reap savings from consolidating programs, said James Kane, president of the company.

"In this market right now, we see a lot of opportunities and not many threats," Kane said. "The threat we see is just our continuing presence in Iraq" and its effects on the U.S. government's budget deficit.

Kane said FSI is bullish on federal IT opportunities because in a growing budget -- total government spending is estimated to hit $2.23 trillion, up 4.2 percent from fiscal 2003 -- projected IT spending is up and makes up a larger share of the $819 billion discretionary budget.

"IT was down around 6.6 percent or 6.7 percent of the discretionary budget," he said. "When you see a half-percent increase [to 7.2 percent], that shows it's a priority."

Of the growth areas in IT, Kane said prospects are strong on the defense side in command, control, communications, computers, intelligence, surveillance and reconnaissance, and future warfighting systems.

On the civilian side, "agencies where people carry badges is where you're going to see growth," he said, such as the FBI and Customs and Immigration functions in the Homeland Security Department.

Spending in DHS on IT is going to increase significantly, Kane said, taking issue with recent media reports that technology expenditures had been cut in the 2004 budget.

"We are very comfortable with our $3.97 billion estimate," he said. That dollar amount is based on FSI's analysis of the congressional conference report on DHS appropriations, he said, and is 31 percent higher than 2003's $3.01 billion budget request.

"Anyone who tells you [DHS IT] spending is going down -- that's not market intelligence, it's market ignorance," Kane said. *

Staff Writer Patience Wait can be reached at pwait@postnewsweektech.com.