IT spending forecast strong

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Federal government spending on information technology will nearly double between now and 2006, according to a report released last week by Input, an IT market research firm.

Currently at $36.4 billion in 2001, spending with IT vendors serving federal agencies will reach $60.3 billion in 2006, according to the Input report, "Federal Information Systems and Services Market, FY 2001 FY 2006."

As part of its budget analysis, Input looked at the distribution of funds among three budget components: telecommunications, computer systems and commercial services.

The fastest growing segment of the federal IT market is in commercial services, defined as outsourcing, professional services, systems integration and processing services. Input expects the segment to grow from $14.2 billion in fiscal 2001 to $27 billion by 2006.

"What struck me the most is how much services are still growing," said Payton Smith, manager of e-government services at Input.

Congress is still split on how much outsourcing should be done by agencies, but the answer should appear more obvious, Smith said: "Outsourcing is pretty much the way government has to go if it's going to be successful. It has to rely on contractors with core competencies that the government is looking for."

The telecommunications segment includes spending for leased voice and data circuits, network services, and the hardware and professional services associated with the area. Federal spending on telecommunications in fiscal 2001 will total about $10.5 billion and is expected to grow to almost $15 billion by fiscal 2006.

The computer systems market consists of capital investments in hardware and software, leased hardware and software, and maintenance services. Input forecasts a slowing growth in this area, where the government will spend $11.6 billion in fiscal 2001 and $18.4 billion by 2006.

The Input report also found that the top 10 federal agencies in IT spending are the Office of the Secretary of Defense, the Air Force, the Army, the Navy, the Treasury Department, the Transportation Department, NASA, the Justice Department, the Department of Health and Human Services, and Agriculture Department.

Smith said the Sept. 11 terrorist attacks will increase spending in security and law enforcement, but that means that other IT programs deemed less important could be "postponed or even canceled." He said that he has asked agency personnel for examples of programs that could face cuts, but has not received a "straight answer on that."

The Input report appears to be in sync with a similar report released this month from the Government Electronics and Information Technology Association that predicted the total federal IT budget to reach $65 billion by 2007.