Report: Federal IT outsourcing to grow

Federal information technology outsourcing could grow at an annual rate of almost 8 percent, from $12.2 billion in fiscal 2005 to $17.6 billion by 2010, according to a market forecast that Input will release Jan. 12.

The Office of Management and Budget's lines of business initiatives will be one of the main factors causing the growth in Input's analysis, said Chris Campbell, senior analyst in the firm’s Federal Market Analysis division.

"A number of factors have combined to make outsourcing one of the fastest growing federal market segments over the past several years," he said, in a written statement. "Generally speaking, the business challenges and market factors driving the decision to outsource are similar between the private and public sectors. Most often, outsourcing is prompted by the need to supplement internal technical resources, reduce costs, infuse new technology or standardize and streamline operations."

OMB's lines of business initiatives require agencies to submit business cases for planned projects to Centers of Excellence, agencies that OMB has designated as specifically qualified to perform services within specialized areas. The lines include human resources, financial, grants and case management; federal health architecture and IT security.

The initiatives will require entire business processes to be transferred out of many agencies to shared service providers, leading to more outsourcing of the work, Campbell said.