Federal IT spending to hit plateau, Input says

Growth in federal IT spending is expected to level out over the next five years as the Office of Management and Budget flexes its muscle in the budget process, a market research firm predicts.

"OMB is exercising a greater degree of control over how agencies are spending their money," said Payton Smith, manager of public sector market analysis for Input Inc. of Reston, Va. "The rush of spending is coming to an end."

Payton gave a preview of Input's federal market forecast, to be released Monday, at a conference today in Falls Church, Va.

There still will be plenty of money being spent. Total federal IT spending for fiscal 2004 is estimated at about $70 billion. That is expected to climb to about $93.5 billion by 2009. That reflects a growth rate of a little more than 6 percent a year, with IT spending holding steady at about 6.5 percent of discretionary spending, Smith said.

That would be a sharp contrast to the 11 percent annual growth rate charted from 1999 to 2003, a period Smith characterized as one of crisis spending, fueled first by the year 2000 conversion and then by responses to the terrorist attacks of September 2001.

"I think agencies are getting pretty close to equilibrium," Smith said. "We are getting out of the homeland security spending rush."

Homeland security needs, which have been driving IT spending, will begin taking a back seat in the next two years to budget controls included in the Federal Information Security Management Act. OMB enforces FISMA, which requires closer attention to IT security and a tighter integration of IT spending with business planning.

That does not mean that homeland security will not be important. The Homeland Security Department is expected to be the largest civilian consumer of IT, boosting its IT spending from about $3.8 billion this year to $5.9 billion in 2009. That spending also reflects the work being done to develop an integrated infrastructure for a patchwork department that was created last year from 23 other agencies and offices.

The greatest opportunity for vendors supplying federal needs is expected to be in outsourcing, which will see an estimated annual growth rate of almost 8 percent, Smith said. Equipment purchases, which will be largely restricted to replacement of existing equipment, will be slowest segment, growing a less than 6 percent a year.

Despite the prospect of flattening IT budgets, there will be no let up in regulatory oversight of IT security, a Hill staffer promised.

"There has not been a significant enough focus on security information assets," said Bob Dix, staff director of the House Government Reform Subcommittee on Technology, Information Policy, Intergovernmental Relations and the Census.

The subcommittee issued an IT security report card this year on which eight of 24 executive branch agencies failed. That was an improvement over the 14 failures last year, and Dix said interviews with many of the departments revealed progress that was not reflected on the report card. But enforcement has not been strict enough, he said. The committee is considering extending requirements of the Common Criteria, a certification scheme required for IT security products used on national security systems.

"We're looking at whether there should be some version of the Common Criteria for software and equipment the civilian agencies buy," Dix said.

William Jackson writes for Government Computer News magazine.