Report: Fed tech spending will grow, but slowly

Federal information technology spending will increase at a 6.6 percent compound annual growth rate over the next five years, reaching $80.7 billion in fiscal 2009, up from $58.6 billion for fiscal 2004, according to a new forecast on federal IT spending.

In the past few years, federal IT spending had seen double-digit growth in the wake of threats to the country's physical and electronic security, but a drop off in urgency related to homeland security spending has caused it to fall, according to the report by Input Inc., a market research firm.

The federal IT budget for fiscal 2005, for instance, is only 1 percent greater than that for fiscal 2004.

Homeland security will be a significant driver of increases in federal IT spending for only another one to two years as it passes from a crisis phase to a normalized period of growth, the report said.

"Despite the large numbers, we're seeing indications of much more conservative growth of federal IT spending than we've observed over the past five years," said Payton Smith, Input's manager of public-sector market analysis. "The rush of homeland security spending is subsiding, while the Office of Management and Budget is demonstrating an unprecedented level of control over IT investment plans in federal agencies."

Categories in Input's report include: computer systems, software, telecommunications, IT services, systems integrations and outsourcing. The analysis said that IT outsourcing would show the strongest growth over the next few years as a result of increasingly complex technology requirements and an onslaught of federal retirements.

The Reston, Va., firm's five-year forecast is based on an analysis of federal agency documents, a review of the government's budget for fiscal 2005 and agency responses to the Office of Management and Budget's IT budget requests. The analysis also takes into account estimated IT expenditures for the judicial and legislative branches, the intelligence community and the U.S. Postal Service, all of which are not usually contained in the OMB's annual IT spending report.