Report: Cloud computing, data center consolidation, security bolster otherwise flat federal IT market

Aug. 3, 2011
New report analyzes key trends and drivers shaping the federal IT market as it undergoes technology and budget-driven transformations.

Deltek, a provider of enterprise software and information platforms for professional services firms and government contractors, has released a new research report that provides a five- year forecast of federal government IT spending. The report, Federal Information Technology Market, 2011-2016, predicts moderate growth in a limited number of high-priority areas, while federal IT spending in aggregate is expected to grow at less than two percent per year over the next five years.

According to Deniece Peterson, Sr. Manager, Federal Industry Analysis at Deltek, and co-author of the report, contractors may want to rethink their market strategy to align with the higher growth segments of the IT market while also preparing for tougher competition. "While the administration is still focused on key cost-saving measures such as cloud computing and data center consolidation, agencies will be under pressure to execute those plans under strict budgets," stated Peterson. "This means opportunities may be rescoped or restructured as agencies struggle with funding and managing these projects."

The Deltek research shows that while overall agency budgets are under pressure, the administration's IT priorities coupled with the recognition of IT as an enabler of cost-savings, will result in continued investment in IT -- though growth will be limited to a narrow set of initiatives. Peterson also suggests contractors focus on teaming for proper contract vehicle positioning. "Companies wanting to grow organically in this market will need to be smarter, more strategic and demonstrate strong operational performance. Growth will come a lot harder in the next five years than it did in the last five years."

The report analyzes the key trends and drivers shaping the federal IT market as it undergoes technology and budget-driven transformation. A key finding: IT spending is not necessarily a named target, but it will suffer as collateral damage to some degree as agencies look for strategies to reduce overall spending. However, those technologies that support cost reduction, increased efficiency, and program oversight and performance will top the list of investments. Some of the administration's near-term priorities revolve around IT, such as leveraging shared services, automating processes to improve delivery of citizen services, cybersecurity, and investing in technology infrastructure to reduce operational costs.

The research report provides budget and spending data across the entire federal government IT landscape, from hardware and software to IT services and communications. It highlights spending "sweet spots" and offers a status report on planned cloud implementation at various agencies, a review of the critical drivers that will fuel future security investment, and a look at the statistics related to data center consolidation and the shifting of IT infrastructure expenditures to mission critical IT. The report also provides analysis of policy issues that will impact federal contractors, such as acquisition reform and insourcing.


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