The government IT market is slowing... so says the WP

So the WP's business section this morning has a piece headlined, "Firms Brace for Softened Market," with a subhed, "Government Slows Tech Spending."

For those of us who track this market, this isn't really news. Last year, we called our 2006 Federal List issue the Survivors Guide, and in the 10 hot companies to watch, there was this:

Another shift reflected in the 2005 list: Fewer new companies are entering the government market. The stabilization of homeland security spending and the maturation of once leading-edge technologies — for example, Web services — have combined to reduce the flow of entrants.

New companies may be fewer, but some familiar names have recast themselves in the government sector. They include Adobe Systems and RSA Security, both of which made this year's list on the strength of significantly broadened technology charters.

Government contractors, which have been riding a wave of unprecedented growth since the Sept. 11 attacks, are starting to feel the effects of an industry-wide slowdown as the government tightens its technology spending, according to company officials and industry observers.

The effects have so far been mild. Companies that in the past five years had experienced booming demand and grown accustomed to record profits nearly every quarter and double-digit annual growth are having to settle this year for numbers that are closer to still-robust historical averages. Stock prices have come off their peaks but remain above where they were a year or two ago. Few, if any, companies are considering significant layoffs.

"I don't think anyone's in a panic zone yet. People realize that homeland security and defense will get attention when they need it," said James M. Krouse, director of market analysis for Input, a market research firm that specializes in government technology spending. "But there's a recalibration of expectations for the next few years."