Report: Federal IT outsourcing accelerates

IT outsourcing by the federal government is expected to grow more than $5 billion over the next four years, according to a report released this week by the market research firm Input Inc.

Driven by tightening federal budgets, the deficit and the country being at war, IT outsourcing is anticipated to grow at a compound annual growth rate of nearly 8 percent, from $12.2 billion in fiscal 2005 to $17.6 billion by fiscal 2010, according to the report.

The Office of Management and Budget's Lines of Business initiatives are cited in the report as a new market driver that will continue to compel agency spending on IT outsourcing.

"Most often, outsourcing is prompted by the need to supplement internal technical resources, reduce costs, infuse new technology, or standardize and streamline operations," Chris Campbell, senior analyst, federal market analysis for the Reston, Va., company.

The lines of business, which include human resources management, financial management, grants management, case management, federal health architecture and IT security, will require agencies to continue spending on outsourcing, the report states.

For each line of business, agencies will be required to submit their business cases to the Centers of Excellence, those agencies deemed specifically qualified to perform such services. And those agencies not chosen in certain lines of business will then focus on transitioning major programs from their agency to a shared service provider, the report states.