Economic sneeze spares feds

Despite the economic downturn, the federal government continues to spend money on information technology, and there are no signs it will cut back.

Several government executives and industry officials said last week that they were optimistic the federal IT market would remain strong. In fact, some officials attending the 15th annual Information Processing Interagency Conference in Austin, Texas, predicted that federal IT spending would grow because agencies cannot avoid upgrading aging systems or replacing obsolete ones.

"We have things we need to do, and to the extent they were funded for 2001, we will be spending," said Ira Hobbs, acting chief information officer at the Department of Agriculture.

Plummeting technology stocks don't concern Dendy Young, chairman and chief executive officer of GTSI Corp., an IT company whose market is totally federal. "We have seen no impact from the collapse in the commercial IT market."

Many multibillion-dollar programs already in the pipeline make it impossible to cut back or slow the growth of spending, such as the Internal Revenue Service's 15-year modernization program.

"The federal government has to spend money on technology. They have no choice," said Donald Upson, Virginia's secretary of technology.

With $90 billion a year spent by federal and state governments on IT, Upson said governments would be wary of cutting the budgets of IT programs designed to help them save money. "There's a shakeout in the economy, and technology is embedded in the economy."

Industry officials continue to target agencies for growth. "The opportunity to market in the federal sector remains strong," said Milton Cooper, the out-going president of the federal sector for Computer Sciences Corp., lead contractor on the IRS project.

But Cooper said it's important that government avoid the mistakes made by industry — growing too far and too fast without a customer base.

Olga Grkavac, executive vice president of the Information Technology Association of America's Enterprise Solutions Division, said President Bush's proposed 2002 budget for IT spending targets more money for the Education and State departments, among others.

"We think we are going to see that [kind of IT spending] around the agencies," she said.

Those kinds of initiatives, combined with the private-sector slowdown, may provide the government some price cuts, Grkavac said. "It may — after all, supply and demand does work. But I think the federal government already drives a pretty tough bargain."

Yet government should not presume any there will be price-cutting, said Steven Perkins, senior vice president at Oracle Federal, a unit of Oracle Corp.

"Government business continues to be a very strong market for us. It's not any more or any less attractive to us" because of the economy, Perkins said. But if the government is looking for economy- connected bargains, they are available.

What makes the government a desirable customer when economic times are tough, Grkavac said, is its constancy. "Government may take a while to pay but it doesn't go out of business."