Study: Defense Powers IT Growth

Study: Defense Powers IT Growth <@VM>Key Drivers Of Government IT Spending

By Nick Wakeman, Staff Writer

The Defense Department looks like the bright, shining star of the government information technology and electronics markets, according to a new study by the Electronic Industries Alliance.

The Pentagon provides more than half of the fuel that feeds the growth of the federal IT market and, for the first time in seven years, EIA expects real growth in the defense electronics market.

Based on interviews with more than 500 government and industry officials and a review of budget documents, EIA predicts that the government IT market will grow from $33.3 billion in fiscal year 2000 to $34.6 billion in 2004. Spending on defense electronics is expected to rise from $22.6 billion in 2000 to $24.9 billion in 2009 in constant dollars.

"This [defense] budget is significantly higher than we have been able to forecast since 1993," said Richard Wieland, manager of market analysis for Raytheon Systems Co. of Lexington, Mass., who chaired the association's defense electronics committee for the study. "There is certainly a lot of good news here."

The overall defense budget will be about $281 billion in 2000, by far the largest in the world, Wieland said. Russia has the next largest defense budget at $64 billion.

Released at an annual "Vision" conference Sept. 21, the EIA study found that the passing of the year 2000 date code problem has unleashed money for other IT projects.

"Last year Y2K was like a sea anchor. Now we are seeing that anchor beginning to rise," said Sarah DeCarlo, assistant vice president of AT&T Government Markets. "I'm not sure if the anchor is in the boat yet, but we are seeing new opportunities emerging." DeCarlo chairs the committee that developed the government IT portion of the study.

Security issues present industry with new opportunities, and there is growing interest in enterprisewide applications and Web-enabled technologies, DeCarlo said.

One issue pushing defense spending on information technology is that warfighters now see IT as another weapons system, said Michael Kush, vice president of marketing and strategy for Electronic Data Systems Corp., who led the EIA panel that developed the defense market forecast.

The philosophy that IT is another weapons system has long been touted by defense IT staffers, but the conflict in Kosovo, dubbed the first Internet war because of hacker attacks, is what finally convinced military commanders, Kush said.

While Army divisions are smaller now, "their lethality is higher. Why? Because of information technology," Kush said.

While EIA has conducted the market survey for 11 years, this is the first year defense officials talked about electronic commerce, information assurance, interoperability and the Defense Information Infrastructure-Common Operating Environment as priorities in driving IT decisions, Kush said.

"There are going to be tremendous business opportunities for all of us: large companies, medium companies and small businesses," he said.

The study notes there are growing concerns that the U.S. military's information technology, far superior to the rest of the world's, will cause interoperability problems when joint operations are under way, Kush said.

On the civilian side, IT spending is influenced by factors such as lessons learned from year 2000 problems, enterprisewide initiatives, emerging technologies and outsourcing opportunities, said Deirdre Murray, market development manager for GTE Information Systems Division in Herndon, Va. She led the committee developing the civilian IT forecast.

In interviews with government and industry officials, concerns were voiced about increasing small business participation, Murray said. Agencies such as the General Services Administration, NASA and the Commerce Department are increasing small business percentages required on their contracts, she said.

"The voices of small business are being addressed," she said.

Government officials also sent a clear message in the interviews that past performance will continue to be a major factor in awarding contracts, she said.

The study also identified key enabling technologies that the government is pursuing, which can reduce the total cost of ownership and manpower and address information overload, said Jude Franklin, vice president and chief technology officer of Litton-PRC Inc. of McLean, Va. He chairs the committee that looked at enabling technologies.

To accomplish these and other goals, agency officials are looking for better security technology, communications improvements and smarter computers that are easier to use, Franklin said.
Lessons Learned From Year 2000

Enterprisewide Security


Aging Work Force

Role of Small Business

2000 IT budget: $33.3 billion

2004 IT budget: $34.6 billion

Source: Electronic Industries Alliance

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