EIA: 1997 budget forecast for information technology near $50B

Total federal spending for information technology in 1997 will be around $50 billion, or double the $25 billion in IT spending the civil agencies and Defense Department formally report in filings to the Office of Management and Budget, according to the Electronics Industries Association.

EIA, in its annual five-year forecast of federal information systems opportunities, said the "hidden" $25 billion includes spending on command and control systems, IT research and development by DOD and roughly $3 billion allocated to IT by small, civil and quasigovernmental agencies. In reports submitted to OMB, DOD pegged its 1997 IT spending at $9.7 billion, with total IT funding by the major civil agencies at $16.7 billion.

Even with the total federal budget estimated to decline sharply over the next five years, EIA believes IT funding will more than hold its own in the face of this decline. The association forecast an overall decline in federal IT spending of just 1.5 percent annually, with civil agencies dipping at a 1.8 percent annual rate and DOD at 0.9 percent a year.

DOD's thirst for new IT systems and hardware will result in the three services and defense agencies running procurements valued at a total of $11 billion over the next five years, according to Michael Kush, manager of market analysis at Electronic Data Systems Corp., co-chairman of the EIA defense market-analysis panel. Two-thirds of these procurements, Kush said, will be indefinite-delivery, indefinite-quantity contracts such as the continuing series of large-scale Army, Navy and Air Force PC and workstation buys.

Kush said that, in many ways, there is also a clear trend by DOD to acquire integration services from equivalent large-scale contracts on a task-order basis, saying that the days of classic stovepipe systems integration contracts have passed. The Pentagon's continued healthy support of IT projects and programs over the next five years reflects what Kush called a "revolution in military affairs," in which a "system of systems" becomes more important to the successful prosecution of an operation than an individual weapons platform.

Lt. Gen. Otto Guenther, Army director of information systems for command, control, communications and computers, emphasized the battlefield importance of IT, saying the Army wants to put its funds primarily into systems that "put steel on the target." Keeping up with deployments to potential global hot spots such as Somalia, Haiti and Bosnia has made "contingency contracting" critically important for the Army, Guenther added. Total federal spending on leased telecommunications will remain steady at about $4.5 billion a year, according to the EIA, with the Defense Information Systems Agency and the General Services Administration becoming "more dominant." By 2001 DISA will account for 37 percent of all spending on leased telecom, and GSA will capture a 23 percent share.

The Justice Department joins the IT "billion-dollar club" in 1997 for the first time, according to the EIA, which pegged that agency's total IT allocation at some $1.2 billion. This reflects increasing security needs and an aging software and hardware base, with much of the IT growth accounted for by the various law enforcement agencies within DOJ. Overall, however, 1997 IT funding by civil agencies will show a greater decline than in previous years, EIA said.

Civil and defense agencies will contract out a larger share of their IT over the next five years, the EIA said, with contracted out spending declining much less than total IT dollars. According to the EIA, "the proportional share of IT dollars contracted out grows from 77 percent in 1996 to 81 percent in 2001."