Internaut: Government IT spending winners and losers

Shawn P. McCarthy

A close look at forecasts of federal IT spending between now and 2007 shows three interesting trends. There are significant winners and losers in some hardware categories, and software trends that will shape agency buying patterns for years to come.

The figures below are based on worldwide IT spending data collected by IDC of Framingham, Mass.

Trend 1: So-called mobility solutions, a catchall phrase for WiFi connectivity, portable computers, networked handheld devices, radio-frequency ID tags, mobile scanners and inventory devices.

Total government spending on notebook PCs will rise from $305.4 million this year to $471.2 million in 2007. Smart-handheld buys such as Pocket PC units and multifunction telephones should rise from $128.5 million to $213.7 million over the same period.

At the same time, desktop PC sales will decline about 8 percent by 2007 because of a general migration to smaller computers, and because desktop prices continue to trickle downward. High-end workstation procurements will fall even more. Scientists and data modelers are finding they can save money and still achieve high-end performance on powerful but cheap Linux platforms.

Trend 2: Contracted IT services and hosted solutions.

Overall spending on government IT personnel costs should flatten out over the next three years, with minimal growth for salary increases. Meanwhile, spending on IT services and outsourcing should increase 6 percent to 7 percent each year, passing $10 billion at the federal level by 2007.

This is driven by e-government initiatives, some of which use fully hosted solutions. It's also driven to some extent by performance-based contracting, which gives vendors greater flexibility in proposing solutions.

Trend 3: Database and application consolidation, plus changes in software licensing.

The big driver here is the Federal Enterprise Architecture effort. By eliminating redundant applications, FEA should reduce overall spending. Getting a better handle on agency applications and software licenses should unify the way licensing is done, further cutting overall costs. Expect to see federal software spending drop by about 4 percent per year over the next three years.

That won't carry over to state and local software spending, which in general will rise slightly.

States and municipalities will shoulder more data collection tasks'with less federal funding'and homeland security requirements will dictate greater data sharing with federal agencies. Software spending should rise about 2 percent annually at the state level, and as much as 20 percent annually at midsize municipalities.

Shawn P. McCarthy is senior analyst and program manager for government IT opportunities at IDC of Framingham, Mass. E-mail him at [email protected].

About the Author

Shawn McCarthy, a former writer for GCN, is senior analyst and program manager for government IT opportunities at IDC.


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