Report sees growth ahead for federal IT services contracts

While budgets are tightening across the federal government, the outlook for information technology service contractors serving federal agencies is surprisingly upbeat ; moreover,  the segment is likely to grow during the next four years, according to a new report today.

Demand for federal IT contracting services is expected to increase from $38 billion in 2010 to $52 billion in 2015, according to the report from Input Inc. market research firm in Reston, Va.

Key drivers of the upward trend are increased demands for efficient and energy-saving technologies, for transparency and open communication, and for innovation, wrote John Slye, Input principal analyst.

“What we are seeing is a fairly minimal short-term impact in the IT services contracting sphere relative to other areas of contracting,” Slye said. “Due to contemporary demands, including data center consolidation, enhancements in cybersecurity and national trends toward cloud computing, the IT service industry will be equipped to bear the force of federal cuts better than others.”

Slye also noted ongoing growth in IT services contracting related to the Federal Data Center Consolidation Initiative by federal CIO Vivek Kundra. The program aims to decrease waste at underperforming agencies and re-allocate the savings to priority mission departments supported by IT.

“The ensuing reduction will become a huge propellant for the IT marketplace, requiring an increase in the need for systems operations upgrades in addition to consulting services,” Slye wrote.

The report said IT services will be needed to manage growth in cybersecurity, business intelligence, process automation, data proliferation, and mobility and service-oriented architectures.

Although President Barack Obama’s anticipated fiscal 2012 budget request reportedly calls for a 10 percent reduction in professional and technical services, Slye noted that those reductions are likely to be in non-IT-related areas, such as cost benefit analysis, policy review, program evaluation and management services.

Although IT service is projected to grow overall, there is a risk of negative impacts along the way that could reduce the forecast, the INPUT report added.