Feds push IT spending toward $50 billion mark

Feds push IT spending toward $50 billion mark

By Shruti Dat'

GCN Staff

In the next five years, the government will boost its information technology budget to $49.1 billion, according to industry analysts.

That would be a 27.5 percent increase over this year's $38.5 billion IT budget.

'This growth once again highlights the importance of IT to the federal government and its acceptance as a process enabler rather than just a support function,' said a recent market forecast from Input, a government industry analyst in Chantilly, Va.

As the government's IT budget grows over the next five years, so will its level of outsourcing, according to a forecast by Input.

As part of the upward spiral, agencies will also continue to outsource more IT services, Input officials said.

In its report released late last month, Input said 82.1 percent of the fiscal 2005 IT budget would go to contractors. This year, 78.3 percent of the government's systems budget will likely go to contractors.

The Input report, Federal Information Systems and Services Market Forecast 2000 to 2005, predicted the contracted-out portion of the federal IT budget would grow 50 percent faster than the total IT budget.

'Outsourcing is being promoted more and more as the government downsizes and internal resources become increasingly strained,' the report said.

Joseph Leo, the Agriculture Department's chief information officer, agreed that contractors can help agencies tackle security issues, transaction processing and government services on the Internet.

James J. Flyzik, the Treasury Department's CIO, said in traditional IT the percentage could reach Input's estimates'traditional IT consisting of components such as data centers. IT, however, now permeates areas that were not always technology-oriented, he said. 'I don't know how you would go about quantifying that,' Flyzik said.

Administrative and legislative mandates for efficiency will lead federal agencies to increasingly turn to the private sector, the Input report said.

The most significant IT spending growth will be in commercial services, which will account for $16.5 billion of the fiscal 2005 funds, Input estimated. The growth highlights the importance of services within agencies, which are seeking expertise in security, platform migration, Internet solutions and business re-engineering.

The need to bridge operating environments and electronically link end users will likely induce a growth in telecommunications spending, Input concluded.

Just a consideration

The report also noted that the government is more willing to consider outsourcing IT functions. One reason is the work force issue; finding talented IT workers is increasingly difficult, Input said. The federal work force has decreased by more than 365,000 people and saved the government $140 billion over the last five years, the report said.

IT is no longer a core competency, Transportation CIO George Molaski says.

Federal agencies are facing tough challenges to recruit and retain skilled workers, plus some of their most-skilled employees are reaching retirement age, said Robert F. Albicker, the IRS' deputy CIO for systems.

Agencies must examine their core competencies and decide which components to outsource, he said. 'Our core competency is tax administration,' Albicker said. 'We will need to use more contractors to support and supplement our staff.'

George R. Molaski, the Transportation Department's CIO, agreed. 'I think IT is no longer a core competency of government, and the more we outsource, the better off the government will be in the long run,' he said. 'If we do it smart, we will save money.'

Leo cautioned that simply turning over IT operations to vendors won't cut costs. Agencies must document lifecycle costs better and concentrate on public- and private-sector partnerships, he said. 'There is a lot of concern about the proper balance between private-sector partners and our employees,' Leo said. 'I need the partnership. To think in black or white'outsource or in-house'excuse me, I don't like that.'


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