Sizing up the defense IT market for fiscal 2018

If the widely-anticipated and much-hoped for rebound in defense spending for fiscal year 2018 does indeed happen, the military’s IT budget figures to benefit from that as the service branches push to field more emerging technologies.

That would represent a near-reversal of fortunes for defense IT funds over the last five years, which the latest Professional Services Council Vision forecast said grew just shy of 1 percent on a compound annual basis during that time -- not counting classified -- as civilian IT far outpaced it.

The 2018 National Defense Authorization Act moving through Congress this week would give the Defense Department $33.2 billion in unclassified IT funds, analysts at immixGroup said during the firm’s Government IT Sales Summit Thursday.

Within that, the most significant spike analysts forecast to see is the department-wide IT budget that would go from $10 billion in FY 2017 to $11 billion in fiscal 2018. And the Navy-Marine Corps portion for defense IT would increase from the low-$7 billion range to around $8 billion, according to the presentation given in Reston, Va.

From a DOD-wide standpoint many of the same drivers of IT activity in the last fiscal year remain large in the current one: automation, cloud computing and cybersecurity. In many instances that means the convergence of all three as the military seeks to automate more of its cyber functions and place them in the cloud.

“The DOD wants more self-healing network capabilities,” said Mark Wisinger, a senior market intelligence analyst at immixGroup. From the military’s standpoint, Winsinger said much of cyber “has become too time consuming… cyber defense is far too manual.”

“They want tools that react instinctively to cyber threats,” he added.

There have seen signals from senior civilian and uniformed military leaders in recent years that automation needs to be integrated into cyber operations in order to help users take on higher-end work.

For example, then Pentagon Chief Information Officer Terry Halvorsen said in September 2015 the military wants more tools that automatically update cyber systems and defend against so-called “Zero-Day” attacks that are not immediately recognized the first time.

Then there is the larger effort on “how to weaponize data” and get it into the forward edge of battle, as described by fellow immixGroup analyst Stephanie Meloni. Coupled with that is the growing influx of analysis needed but a shortage of analysts, she said. This presents an opportunity for industry to help fill that workforce gap.

IT initiatives at the Navy will center around “wanting technology that requires less manpower to operate,” Meloni said.

Unmanned technologies are one avenue the Navy has increasingly touted as a way to operate in a mission set without that manpower requirement. In September, the Navy narrowed down its “Orca” Extra Large Unmanned Undersea Vehicle competition field to Boeing and Lockheed Martin with a final downselect currently anticipated by the end of next calendar year.

The immixGroup forecast for fiscal 2018 defense IT spending does not hold much promise for overall top-line growth in the Army or Air Force however. The Army is projected to hold flat at $9 billion and the Air Force will only inch up into the mid-$5 billion range, according to the presentation.

But within the Air Force, space figures to be where much of the action is. Northrop Grumman has said so through its acquisition of Orbital ATK to give one example of where industry is positioning for growth in the space market.

“The Air Force wants to manage space battles in real time,” Meloni said. One upcoming contract under that domain with an anticipated early 2018 solicitation is the Enterprise Space Battle Management C2 effort to find a contractor that can develop and integrate mission applications.