How GEIA sees the future

Moderate growth for IT spending, while outsourcing, info-sharing still command dollars

While IT spending levels will increase moderately during the next five fiscal years, companies will still have an array of program-focused opportunities to pursue.

Hot-ticket items include information-sharing, outsourcing and cross-agency initiatives, according to the Government Electronics and Information Technology Association's latest five-year market forecast.

Federal IT spending will grow to $74.1 billion in current dollars in fiscal 2012 from $64.7 billion in 2007, according to GEIA's forecast. During this period, Defense Department IT spending will have a compound annual growth rate of 2.8 percent, while civilian agency IT spending will have a rate of 2.7 percent.

The trade group presented the data at its annual conference Oct. 18 and 19 in Falls Church, Va.

The information for GEIA's forecast came from 150 interviews of agency officials as well as information in Office of Management and Budget Circular A-11, Exhibit 53 reports and the Defense Department's IT-1 Report. The forecast also draws on GEIA's forecast database and product and contract data provided by Eagle Eye Inc. from the government's Federal Procurement Data System.

"The forecast going forward is moderate, but moderate with a caveat," said Payton Smith of Booz Allen Hamilton Inc., who presented the IT top line budget forecast. "Any significant event could change this picture in any given year."

As a result, agencies could downsize, eliminate or delay awards for some of their key programs.

Several factors could impact IT spending over the next five years, according to GEIA. As President Bush's term draws to a close, there will not be many new IT initiatives, and Congress will look for proven program successes. During the rest of Bush's term, his priorities will continue to be the war on terror, homeland security, border patrol, health IT and immigration.

Second, as deficit spending increases, it will put pressure on agency IT expenditures. Agencies will have to decide whether or not to shut down their legacy systems.

They also will wrestle with recruiting and retaining and training acquisition professionals and filling the gap of experienced midlevel managers. Outsourcing, one of the objects of the President's Management Agenda, will become an even bigger issue for the agencies.

Third, the Office of Management and Budget is the key to IT investment, and if agencies want funding, they need to comply with the Government Performance and Results Act, the Clinger-Cohen Act and Federal Information Security Management Act. OMB wants agencies to trim steady-state IT dollars, to manage the systems they have today and use shared services.

Agencies continue to focus on consolidating redundant systems, creating cross-agency initiatives, outsourcing IT functions and services and making their systems interoperable with those of other agencies.

"IT spending is really becoming program focused," Smith said, as the government increasingly concentrates on buying total enterprise solutions and less on isolated products and services.

According to GEIA, these are some of the civilian agency highlights that will push the growth over the five-year forecast period:

» Health and Human Services' portion of the IT budget will grow from $5.6 billion to $7.3 billion

» Information sharing and border security initiatives will drive the Homeland Security Department's IT spending growth.

» FBI's IT requirements will continue driving the Justice Department's budget.

» At the Treasury Department, IRS has the bulk of the IT budget, some of which will go for homeland security-related projects, such as tracking terrorist funds.

» At NASA, the vision for space exploration will power the agency's growth
» At the Veterans Affairs Department, the HealthVet and Vista systems account for 33 percent of its budget.

» At the Commerce Department, preparations for the 2010 Census are driving IT spending.

All this comes with another caveat: Disasters also could affect market opportunities, forcing affected agencies to reallocate their budgets.

"Many of the markets we serve place industry in an event-driven environment," said John Williams of Northrop Grumman Corp.'s IT sector, adding that future catastrophes will continue to shape the government IT marketplace.

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