After five years of steady growth, information technology spending by the federal government is expected to decline about 1 percent a year over the next five years in inflation-adjusted terms, from $81.2 billion in fiscal year 2012 to $77.7 billion in fiscal 2017, according to a new forecast being released this week by the TechAmerica Foundation.
By most measures, IT budgets are expected to stand up to some of the most intense budget pressures in years, in part out of the belief that IT is critical to streamlining government operations. Moreover, a number of forces are accelerating federal IT demand in government, including:
- Increased online services to citizens (requiring greater IT capacity)
- Legislative and regulatory requirements
- Maintenance of legacy systems
- Investment in virtualization and data center consolidation
- Modernization of systems and infrastructure
- Cybersecurity
- New and emerging needs, such as wireless and mobile technology, health IT, energy efficiency, and business intelligence.
At the same time, overwhelming pressures to reduce the federal deficit, along with dramatic cuts planned in defense and for discretionary civilian budgets are causing federal officials to reconsider IT projects like never before.
Federal spending on defense IT spending is expected to decline 1.8 percent annually in real dollars, from $38.4 billion in fiscal 2012 to $35.1 billion in fiscal 2017. That doesn’t fully account of significant amounts of IT associated with mission systems, the study’s authors noted.
Of greater concern, the forecast noted, is the extent to which “transformation activities” to improve operations and security need to be self-funding. Little if any funding is available to implement newer and transformational systems.
“Investing to save is very difficult,” said one of the more than 200 senior industry officials and numerous government executives consulted in preparing the forecast.
Civilian agency IT spending, meanwhile, at $42.7 billion in fiscal 2012, is expected to remain flat on a constant dollar basis over the next five years. Only four agencies – most likely the Departments of Agriculture, Homeland Security, Justice and Treasury – are expected to show an upward trend in IT over the next five years, a spokesperson for the study said.
Efforts to consolidate infrastructure and share common services are expected to help reduce some operating costs, the forecast said, but finding funds to keep investing in cybersecurity remains a major challenge for agencies.
Inherent in the TechAmerica Foundation forecast was its assumption that among four scenarios that might emerge from the current debt reduction debate, the most likely was where Congress arrives at a $2.1 trillion deficit reduction package, and succeeds in avoiding full sequestration.
If there is a silver lining in the outlook, the study noted, it may lie in new legislative requirements and four other emerging opportunity areas, although each introduces new risk factors:
Consolidation – including an increased focus on enterprise software license agreements and continued efforts to consolidate data centers and turn to cloud computing and shared infrastructure services.
Wireless/mobile – extending enterprise applications to field employees promises improvements in productivity, although securing access to enterprise systems remains a major issue.
Cybersecurity – minimizing risks and vulnerabilities of new and disruptive technologies remain key challenges, as do identity management and authentication
Automation – streamlining IT systems that support business processes offer potential new efficiencies.