Defense Cost Cutting Will Lead to Decreasing Federal IT Spending, According to Deltek Report
New Deltek GovWin IQ report predicts continued budgetary shifts to protect mission-related IT spending
HERNDON, Va. – July 23, 2015 – According to a new report from Deltek, federal IT spending will decline from $97.7 billion in FY 2015 to $94.4 billion in FY 2020 as agencies continue to pursue new capabilities under decreasing budgets and increasing oversight. Government-wide acquisition initiatives continue to drive budget austerity, forcing agencies to adapt to budget realities as they work to respond to increasing mission demands.
Deltek’s new GovWin IQ report “Federal Information Technology Market, 2015-2020” forecasts contractor-addressable federal agency budgets for Hardware, Software, IT Services, and Communications and Network Services. Deltek’s forecast includes IT spending not reported through the Office and Management and Budget (OMB), such as the judicial and legislative branches, the intelligence community, federal organizations that are not subject to federal IT budget reporting requirements, and IT embedded in large defense systems. The report addresses the major drivers and inhibitors shaping federal IT decision-making.
In response to both OMB policy and necessity, agencies continue to implement strategies for reducing spending on commodity hardware and software. This, coupled with efforts to root out wasteful and redundant spending, will free up some funding for agencies to redirect to mission-critical and operational needs. However, mission spending will also be under tight scrutiny due to the persistent gap between mission funding and requirements. Agencies will be compelled to invest in cost saving technologies, such as infrastructure modernization, cloud computing, and automation to cut costs yet maintain mission commitments. At the same time, an increasing proportion of agency IT budgets will be devoted to cybersecurity to shore up weaknesses and vulnerabilities in enterprise systems and networks. “It’s not surprising that ninety-two percent of respondents to the survey we conducted as research for this report noted cybersecurity as a major priority in the next three years,” said Deltek analyst Angie Petty.
The specter of sequestration will also impact agency decision-making in the coming years. Although Congress continues to work through FY 2016 appropriations, the apparent consensus with the House and Senate to keep sequestration in place sets the stage for continued conservatism among agency leadership. There is a 1-2% annual growth built into sequestration for FY 2016 and beyond, which will help lessen some of the future burden. However, technology evolution coupled with increasingly complex mission demands will likely outpace this growth, requiring agencies to continue to seek cost-cutting strategies.
“Overall market conditions indicate more of a shift in spending priorities and acquisition strategies versus straight-line cuts as we saw when sequestration was first implemented in FY 2013,” said Deniece Peterson, Director of Deltek’s Federal Industry Analysis. “While this will result in overall market contraction, agencies have more freedom to determine how and when budget trimming is necessary.”
Expanding IT reform initiatives and increasing spending scrutiny demands that contractors know their customers. Opportunities to support federal agencies as they transition to leaner organizations exist for contractors with deep understanding of the budgetary, policy and human capital issues plaguing federal IT decision-makers.
For more information on GovWin IQ and this report, visit the “Federal Information Technology Market, 2015-2020” page on Deltek.com/GovWin. The report is free to subscribers of GovWin’s Federal Industry Analysis program. Press interviews can be arranged by contacting Lauran Cacciatori.
About GovWin IQ
Deltek’s GovWin IQ provides the market intelligence tools and analysis government contractors need to gain a competitive advantage and be a formidable player in the federal market. Backed by a team of government research and analysis experts, GovWin IQ provides the most powerful, comprehensive, and timely lead generation and business intelligence solutions available. More than $1.8 trillion opportunities are tracked every year – a number no other competitor can match. www.Deltek.com/GovWin
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