IT outsourcing surges from retirements, mandates

The Agriculture Department, like many federal agencies, will boost its IT outsourcing over the next five years as it tries to accomplish more of its enterprise projects with the IT dollars Congress appropriates, market research firm Input said. USDA will contract out its IT needs at a 12.1 percent compound annual growth rate from fiscal 2003 through 2008.

USDA has workers at various agencies in almost every county in the nation, so connectivity is a top priority. The department's Common Computing Environment will place 35,000 workstations, 8,000 printers and 2,700 network servers in 3,500 offices nationwide. That will require USDA to almost double the amount of IT outsourcing, from $387 million this year to $685 million in 2008, Input said in its federal outsourcing market view.

The most dramatic expansion will be in infrastructure and application services, but desktop services, network and application management, and business process outsourcing will also see increases.

Most agencies are ratcheting up outsourcing to the point that it has become the federal government's fastest-growing technology segment, accelerating at a compound annual growth rate of 13 percent. The dollar value will explode from $8.5 billion in fiscal 2003 to more than $15.5 billion in fiscal 2008, Input predicted. The Defense Department will see the biggest gains.

'A huge percentage of the federal IT work force is reaching retirement age within the next five years. That gives federal agencies little choice but to pursue outsourcing to meet the technology needs of e-government and information sharing in defense of the homeland,' said Lauren Jones Shu, Input senior analyst and author of the report.

In addition, the waves of federal retirement, new legislation and the Bush administration's mandate to streamline government will converge to account for steep increases in private contracting, Shu said. Although the military services spend more on outsourcing, civilian agencies are catching up in job-sourcing competitions under President Bush's management agenda.

"The Homeland Security Department is driving this increase with outsourcing as a way to quickly ramp up," Shu said. The Transportation Security Administration, for example, has outsourced its entire IT infrastructure to Unisys Corp. in a deal potentially valued at more than $1 billion, she said.

Business process outsourcing, such as claims processing and call centers, is the fastest-growing category, expanding at a rate of almost 19 percent over the five years, the report said. DHS is plans to outsource travel services, retiree and annuitant payments, and support services.

About the Author

Mary Mosquera is a reporter for Federal Computer Week.

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