Although still growing steadily, the US federal government’s spending on technology is certainly not rising as rapidly as in the past. However, this by no means spells a lack of opportunities for IT vendors as US federal technology budgets are expected to grow at a compound annual growth rate (CAGR) of 5% over the next five years, from $60.5 billion in FY2005 to $77.2 billion in FY2010.
A new report has predicted that the US DHS will significantly increase its technology spend.
The federal government’s continued slow growth in technology spending does not translate into a lack of opportunities for IT vendors. Agencies of all types continue to look to technology to modernize outdated systems, improve constituent service, focus on core missions, integrate siloed infrastructures and, at times, increase revenue.
The Department of Homeland Security (DHS) is one area forecast to experience a significant expansion in technology investment. Datamonitor expects DHS investment in IT to grow at a CAGR of 12.2% between 2005-2010, more than twice as fast as the federal government in total.
IT investment by DHS reflects concerns for national safety as well as the department’s need to integrate legacy infrastructure and administrative systems.
IT services and software have also been identified as areas of growing focus.
Service-based contracts allow federal agencies to compensate for retiring staff, reallocate internal resources and refresh aging technology without making a major capital investment.
In terms of software, enterprise resource planning (ERP) systems, e-government and customer relationship management (CRM) solutions are all expected to be key areas of investment as they offer agencies opportunities to increase efficiency and improve constituent services.
In addition, the federal government’s current trend towards cross-agency service sharing provides further opportunities to vendors despite the government’s overall slowing growth. For example, the Office of Management and Budget’s Lines of Business (LoB) initiative aims to increase efficiency and reduce costs by designating certain agencies to provide common business functions to other agencies.
The LoB initiative may create opportunities for vendors to develop and implement the large, integrated systems designated agencies will need to perform their duties.