Federal civilian IT spending set to surge in fiscal 2025

IT spending among federal civilian agencies has seen a marked increase over the past couple of fiscal years. The upcoming priorities for IT spending in fiscal 2025 include cybersecurity, AI, improving the public experience and making use of data as a strategic asset — as well as the stalwart category of IT modernization.

Overall, the budget for federal civilian IT market has increased 8.1 percent from fiscal 2023 to fiscal 2025. Altogether, federal civilian IT budgets are projected to be $76.8 billion in fiscal 2025.

The agencies expecting the greatest increases include the Department of Education with a 30% increase, Social Security Administration with a 12% increase and the Department of Homeland Security with a 9% increase. Agencies that have seen their budget requests decrease from fiscal 2024 by the largest margins include Department of Veterans Affairs with a 12% decrease, NASA with an 11% decrease and the Department of Agriculture with a 7%decrease.

Civilian agencies prioritize investments in application development, application support and operations, and business software. Let’s take a closer look at the priorities that make up IT budget requests, along with a couple of key programs.

FY2025 civilian IT budget priorities

Cybersecurity: Civilian cybersecurity budgets have increased 15% from FY2023 to FY2025. The cybersecurity spend in the civilian sector is an estimated total of $13 billion for FY2025.

The focus on cybersecurity spending for the coming fiscal year is on public service safety and security. Program emphasis will see strides in implementation of Executive Order 14028, The Federal Zero Trust Strategy, and other OMB memorandums.

The Federal Zero Trust Strategy (Office of Management and Budget, or OMB, Memorandum M-22-09) was issued in January 2022, to guide agencies toward zero-trust cybersecurity principles. Among the key elements in the strategy is continuous verification of user identities and device integrity. Agencies are encouraged to invest in technologies with such security capabilities built-in as a primary consideration in procurement.

Another key concern in cybersecurity spending is what’s known as “software supply chain security.” OMB Memorandum M-22-18 was issued in September 2022 specifically to enhance the security of the software supply chain. It focuses on the exclusive use of software developed with secure practices to mitigate risks associated with unvetted technologies.

Post-quantum cryptography is also of considerable interest in cybersecurity spending. OMB Memorandum M-23-02, issued in November 2022, established requirements for agencies to identify and prioritize the use of cryptography in sensitive systems vulnerable to future quantum computing threats. This memorandum aims to prepare federal systems for a shift in security paradigms due to advancements in quantum computing.

Artificial intelligence: Not surprisingly, AI continues to be the subject of considerable attention — particularly managing AI technologies to improve public services and federal operations.

AI spending in the civilian sector underscores agencies’ efforts to support Executive Order 14110 on Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence. This includes some $70 million to establish agency chief AI officers. Significant additional AI management funding is being requested for Departments of State, Agriculture, Commerce, Energy, Homeland Security, Housing and Urban Development, Interior, Justice, Transportation, Treasury, EPA, National Science Foundation and USAID.

Additional AI investment will see approximately $300 million in mandatory funding for AI risk management, to address major risks associated with AI and advance its use for the public good. Some $40 million is requested for the U.S. Digital Service, General Services Administration (GSA) and Office of Personnel Management (OPM) for a “national AI talent surge.” This spending aims to increase agencies’ recruitment and hiring of AI talent, to fill urgent gaps at key agencies and to expand government-wide AI training programs to upskill the existing workforce.

Digital-first public experience: Another key IT priority in the federal civilian sector is aimed at improving the digital experience for the American public. This includes implementation of Executive Order 14058, the 21st Century Integrated Digital Experience Act, and other OMB memorandums.

Data as a strategic asset: Another top IT budget priority would see improved use of accurate and actionable data for decision-making. Look for agencies to put the Federal Data Strategy to work for data management guidance.

IT modernization: As always, IT modernization rounds out the spending requests among federal civilian agencies. Such efforts continually focus on adoption of modern technologies and retiring legacy systems. To that end, an additional $75 million has been requested for the Technology Modernization Fund (TMF).

VA and CISA take the lead

While projected to experience a reduction in its IT spending request for FY2025, the VA is still innovating in AI, shifting investments internally to allow capacity to integrate the technology.

The VA is directing $420.7 million to customer relationship management, an

investment to support integration of information enabling on-demand and seamless access to veterans’ benefits. The investment efficiently facilitates case management of veteran and beneficiary access to VA services.

Within that program, approximately $18 million is targeted for innovations and artificial intelligence. The VA is piloting AI at these early stages to be compliant with government security, Health Insurance Portability and Accountability (HIPPA) Act, as well as other data privacy laws when applicable and necessary. In this way, the VA can start to understand what kind of productivity gains they can realize from AI integration.

As companies release new software functionality, the VA is working on using that expanded functionality to improve efficiency, increase access to care and benefits, and to streamline and further improve the veteran experience.

Meanwhile, in the cybersecurity arena, the Cybersecurity and Infrastructure Security Agency (CISA) is also seeing innovation, requesting some $442 million to build out its cyber analytics and data system (CADS). The CADS program is intended to be a system of systems, providing a robust and scalable infrastructure and analytic environment.

The CADS environment will be capable of integrating cybersecurity data sets and providing internal tools and capabilities to ingest and integrate data. The program also aims to automate data analysis, to support the rapid identification, detection, mitigation and prevention of malicious cyber activity.

As budget requests are finalized, IT manufacturers and solutions providers would be best served by positioning their offerings in a way that supports not only the general IT priorities of federal civilian agencies, but some of these programs and initiatives.

Andy Dean is a senior market intelligence analyst for immixGroup, part of Arrow Electronics’ public sector business. immixGroup delivers mission-driven results through innovative technology solutions for public sector IT. Visit immixGroup.com for more information. Interested in greater in-depth analysis of the budget?  Register to attend immixGroup’s 2024 Government IT Sales Summit on November 21 in Reston, Virginia!