Forecast reveals hidden IT

Information technology will have to compete for dollars in agencies' discretionary

budgets, and IT dollars are being folded into agencies' budgets like never

before, according to an annual industry forecast.

"IT will have stiff competition from military readiness, increasing

salaries — even though IT is seen as mission-critical," said Mary Freeman,

manager of market research at Verizon Federal.

Freeman presented the Government Electronics and Information Technology

Association's Federal IT Forecast for the next five years Nov. 2 in Arlington,

Va. GEIA forecasts that federal IT spending will rise 1.7 percent annually

from $38.9 billion in 2001 to $42.4 billion by 2005.

IT is being incorporated into agencies' budgets in a way that makes

it hard to separate it from other priorities, Freeman said. However, more

IT dollars are being accounted for as a result of better capital planning,

she said. Capital planning helps agencies figure out what they really need

to buy to improve performance, she said.

Among GEIA's findings:

* IT now includes such areas as financial management.

* The Department of Health and Human Services integrates IT with its

administrative budget.

* Government is spending more on contracting vehicles such as governmentwide

acquisition contracts, General Services Administration schedules and modifications

of existing contracts.

* About 79 percent of IT work will be outsourced in 2001, and that will

grow to 81 percent of the work by 2005.

"This is a very healthy market for our industry to address," Freeman

said.

While Year 2000 rollover preparation drove IT spending in 1999 and 2000,

information security is now the IT spending driver, said Judy Cavanaugh,

director of strategic planning for Unisys Corp. Cavanaugh presented the

outlook for the civil agencies' IT market. The civil IT market is expected

to grow 2.2 percent during the next five years, she said.

The issues of security, an aging IT workforce, outsourcing and privatization,

e-government and a federal chief information officer will confront the government

in the coming years and will benefit industry, she said. The area with the

most robust growth is IT and telecommunications services as government moves

away from just buying equipment.

"E-government brought many new ways of doing business. Existing players

must compete with new companies that have out-of-the-box thinking," Freeman

said.

The GEIA market forecast is created through 275 interviews at 65 departments

and agencies with senior information resources managers, oversight officials,

budget analysts, program managers, congressional staff and Wall Street analysts

combined with Office of Management and Budget submissions to Congress.