Forecast: Federal IT spending to slow

The federal government's spending on information technology will slow down over the next five years, but the impact on IT contractors will be minimal, according to London market research firm Datamonitor plc.

The report, "Finding Opportunities in a Tightening U.S. Federal Market: Five-Year Outlook for Vendors," predicted that the compound annual growth rate of U.S. federal technology spending will drop to 4 percent over the next five years.

The annual growth rate has fluctuated between 5 percent and 10 percent during the past decade, Datamonitor said.

The slowdown heralds greater accountability in how public funds are spent and marks a fundamental shift in how government views technology purchases, the report stated.

Federal IT spending will increase from $46 billion in 2004 to $56.5 billion in 2009, but with such large outlays, the slowdown in growth will not be readily apparent to IT contractors, according to Datamonitor.

Companies that sell to the federal government will find three areas growing at a rate faster than the market overall: customer or citizen relationship management, enterprise resource planning and security. Collectively, these opportunities will account for close to $7 billion worth of total federal government technology investments by 2009. n

Staff Writer William Welsh can be reached at wwelsh@postnewsweektech.com.