Why are Government Contractors Cutting Their Cybersecurity Budgets?

Government contractors reduced their spending on cybersecurity in the past year, despite several high-profile data breaches, a new survey shows.

About 52 percent of businesses reported a slight decrease in cyber spending in the past year. About 17 percent said their cyber spending increased dramatically, while 31 percent said it increased slightly, according to a new survey from contracting analysis firm Deltek.

"We're surprised that over half of the companies . . . had experienced decreased spending in cybersecurity," Deltek Vice President Kevin Plexico said during a call discussing the results. "Our best guess is that the ones that are decreasing are probably not the ones that have had breaches."

Still, about 46 percent of respondents said they had experienced some type of physical or virtual breach, according to Deltek. About 33 percent said they experienced denial-of-service attacks, 33 percent cited data breaches and 13 percent pointed to physical breaches. 

Large contractors are also cutting their overall IT budgets, Deltek found. About 60 percent of large firms -- generating $100 million to more than $1 billion in annual revenue -- decreased their IT budgets last year. Sixty-six percent of small firms, generating less than $20 million, saw an increase in IT budgets. 

That divergence between small and large firms will probably even out through 2016, the report said, because large companies said they expected a slight increase in IT spending, while smaller companies expected a decrease. 

During the call, Plexico said he was "a bit surprised" at decreasing IT budgets, because "normally, when you see companies growing . . . you sort of expect that IT budgets are going to grow along side that."

But respondents reported feeling pressure to "effectively decrease cost so that overhead cost could be recaptured in profit," he said. 

When asked about their biggest IT challenges, budget pressure and IT security were among the most frequently cited, according to Deltek.

Government contractors are diversifying beyond federal business, the report said. About 62 percent of contractors' business came from federal customers last year, the survey found. The previous year, about 427 firms reported 84 percent of their business came from federal customers. 

"Firms made it clear that they are not standing still waiting for the business environment to improve," Deltek's report said. "Companies are expanding their operations outside of federal contracting in search of higher-growth markets."

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