As Washington hunkers down for an era of tight federal budgets, information technology vendors can take some comfort in a projected modest rate of growth in federal IT investments. Between 2011 and 2016, federal spending for IT should grow by 12 percent, in total, for an average compound annual rate of growth of about 1.7 percent.
Even with those small gains, vendors can expect agencies to be much more careful in how they go about IT procurement.
Federal agencies will spend about US$99 billion in total on IT in 2016, versus $93.6 billion in 2011, according to the latest forecast by federal contracting consultant Deltek.
The amount of IT spending that is actually available for government contractors will grow from $84.1 billion in 2011 to $91.3 billion in 2016, the forecast notes. Deltek’s figures are generally higher than those provided by the Office of Management and Budget (OMB).
“OMB reports primarily on executive branch agencies, while our forecast includes the legislative branch, judicial branch, intelligence agencies, and quasi-government entities such as the Postal Service,” Deniece Peterson, senior manager for federal analysis at Deltek, told the E-Commerce Times.
Deltek calculates what it calls the “addressable” level of spending, which excludes what the government spends on IT employee salaries, to get closer to a figure that is actually pursuable by federal contractors.
Agency Spending Patterns Change
The growth in projected IT spending is attributable to several factors.
“Information technology is an enabler for cost savings. It fills capability gaps left by an understaffed workforce, and it allows for capabilities that agencies need to meet mission goals,” Peterson said.
However, unlike the past, when nearly all agencies were able to spend more for IT, the future will be characterized by a “triage” approach, Peterson predicted.
“Some agencies will receive increases, while others will see budget cuts. The agencies that conform to the administration’s most important priorities will see increases at the expense of other agencies,” she said. While IT is not immune from cuts, the IT function is not a “direct target” when it comes to reducing federal spending.
One factor for maintaining the level of IT spending at current levels with no radical cuts is that the efforts to improve IT productivity, such as using cloud technology or eliminating duplication in data centers involves initial “up front” investment. A cautious Congress could withhold some of these investments and thus perpetuate IT spending at existing levels.