Stimulated by the war in Iraq, increased threats of terrorist attacks and the formation of the U.S. Department of Homeland Security (DHS), the federal IT market could top US$68 billion by 2008, a new study predicts. While the anticipated recovery of commercial IT markets never quite materialized in 2002, "the federal government remains an attractive marketplace based on its sheer size and consistent spending patterns," according to the Federal IT Market Forecast released by Chantilly, Va.-based Input. "Projected increases of 13 percent in [fiscal] 2003 spending over [fiscal] 2002 mean that the government is actually an engine of growth," the report stated.
Homeland security and e-government initiatives remain the highest IT priorities for federal agencies, said Payton Smith, manager of federal market analysis at Input. These two areas are driving significant near-term increases in spending, he said.
According to Input, government spending on IT products and services will increase at a compound annual growth rate of 8.5 percent, from $45.4 billion in fiscal 2003 to $68.2 billion in fiscal 2008.
Driving much of that estimated growth is the recent formation of the DHS. The size of the DHS IT budget is second only to that of the Department of Health and Human Services among civilian government agencies, according to a market forecast by McLean, Va.-based Federal Sources Inc. For fiscal 2003, the DHS commanded a $3 billion IT budget. Federal Sources projects that figure will increase to $4 billion next year.
"The DHS is large enough and expected to grow fast enough to rival the military services in terms of IT spending" by 2008, according to the Input forecast. And if Federal Sources' estimates are accurate, that would place the DHS IT budget above the $6.5 billion mark, which is the current estimate for U.S. Air Force IT spending for fiscal 2004.
The "DHS is off the charts, with an IT [budget] gain of $745 million" from fiscal 2003 to fiscal 2004, said Jim Kane, president and CEO of Federal Sources.
Input's forecast concluded that the growth in federal IT spending will be greatest for outsourcing services, as opposed to spending on hardware, software and telecommunications. In addition, outsourcing of government IT is expected to reach a high of nearly 87 percent in 2008.
The anticipated retirement of a large portion of the federal IT workforce, the critical lack of IT skills and the Bush administration's stated preference to partner with the private sector are all contributing factors to the anticipated growth in outsourcing, according to the Input study.
Kane recommended that companies take specific measures to ensure that they are positioned to take advantage of the new federal IT market.
For example, companies should map their product and service offerings to agency enterprise architecture plans and overall mission statements. In addition, business development managers should study the government's use of business-case scoring, which in addition to setting certain security standards ensures that all new IT investments provide a return on investment that's equal to or greater than alternate uses of the same funding. It also requires that all such spending goes to products and services that directly support an agency's mission. -- Computerworld (US)
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