EIA's 5-year forecast predicts slight drop in IT spending

Despite continued pressure on the federal budget, agencies' spending on information technology should drop only slightly over the next five years, according to an annual forecast conducted by the Electronic Industries Association.

Compared with other discretionary spending, IT budgets should be relatively protected from budget cutters into the next century because Congress and agency heads view technology as a way to improve efficiency during continued downsizing, according to EIA's Government Division.

In its eighth annual look at IT spending in the federal government, EIA reported that the federal government's total IT budget should drop at a real annual rate of 1.2 percent over the five-year period from fiscal 1996 to fiscal 2001.

Defense Department IT spending, estimated to be $9.8 billion in fiscal 1996, is predicted to continue the downward trend during the 1990s and drop at an annual rate of 1.5 percent during the five-year period, according to the forecast.

Civilian IT spending, which will total an estimated $16.2 billion in fiscal 1996, should fall at an annual rate of 0.7 percent between fiscal 1996 and fiscal 2001. That rate is a negligible improvement from last year, when EIA predicted civilian IT spending would drop at an annual rate of 1.1 percent a year from fiscal 1995 to fiscal 2000, the first downturn since EIA started tracking five-year IT spending.

The relatively flat spending totals are not cause for alarm, said Tom Milbourne, chairman of the EIA Federal Systems Committee, which produced the forecast, and director of strategic planning for Hughes Information Technology Systems.

"In terms of federal contracting, this is a good story," he said. "There is still a healthy federal information technology marketplace, and in today's environment, that's a positive story."

The way the federal government buys IT, however, will continue to change. Outsourcing accounted for about 70 percent of all IT spending in fiscal 1995, and that percentage should grow.

Driving growth in outsourcing will be the implementation of procurement reforms and the Year 2000 problem, EIA said.

Agencies spending the most on IT in 2001 will be the Air Force and the Department of Health and Human Services, both at about $2 billion, followed by the Navy and Marine Corps, the Transportation Department, the Army and the Treasury Department, EIA estimated.

The EIA forecast will be released at EIA's Five-Year Forecast of Federal Information Systems conference, held June 25-26.