Industry group warns of bleakest IT budget in 17 years

Tuesday - 10/18/2011, 6:14am EDT

Emily Kopp, reporter, Federal News Radio

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The government's IT budget hasn't been squeezed this hard since Forrest Gump was on the big screen in 1994, according to an industry group survey.

Civilian agencies will spend $42.7 billion on technology in fiscal 2012, and see an increase of two percent to $46.8 billion by 2017. Defense technology spending will rise 0.2 percent from $38.4 billion in 2012 to $38.9 billion five years later. The TechAmerica Foundation made these predictions in a survey based on interviews with government executives, Congressional staff and outside experts.

Only four agencies are predicted to buck the trend and increase spending on technology.

"Almost all the increases are driven by mission requirements," said TechAmerica spokesperson Robert Haas at a media briefing on the survey results Monday in Washington.

For example, he said, the year-old Affordable Care Act requires that the Health and Human Services and Treasury Departments invest in certain technology. The Justice Department is increasing spending to meet public safety requirements. The Agriculture Department also is increasing its budget to fulfill essential tasks.

Agencies interviewed don't plan to spend money on extras, Haas said. "They will forgo the optional upgrade if the system is good enough," he said.

Rather than spend money on back-office systems, agencies are considering consolidating their email and file-sharing systems, he said.

Departments are looking at consolidation in other ways, too, he said. In the past, any money an agency saved from technology would go into a general government fund.

"Incentives weren't aligned for you to necessarily save a lot of money and reinvest it," he explained.

But some agencies are making the case to reinvest money saved from more efficient technology.

The Interior Department is consolidating its IT and restructuring its technology staff to save about $100 million a year beginning in 2016. That money will go back into its IT budget.

Other agencies are watching. Haas said the Army has adopted this "self-funding" approach for most new IT projects.

Agencies also are using nontraditional contracts to make the most of their few dollars. The survey found that agencies are considering combining contracts to get the best price; making wider use of indefinite delivery, indefinite quantity contracts; and signing contracts for shorter periods.

"They figure that there's less risk in a shorter time frame. That's been borne out not just in the government, but in commercial industry as well," Haas said. "They're also looking at techniques where they partner with the contractor to develop a prototype to de-risk the final solution or to have reset points throughout where they make decisions on a go or no-go basis."

TechAmerica's survey did find some silver linings for vendors.

Agencies may spend money on cloud computing, consolidation initiatives — including data centers and email systems — and other technology that can save them money in the long run.

While agencies are not looking to give every employee a new iPhone, agencies will also likely invest money on mobile devices that help them achieve their missions.

"The caveat is tied to the agency's specific mission. That becomes more of a litmus test," Haas said. Cybersecurity also will continue to be a market opportunity, according to the TechAmerica Foundation survey.

The group also said its members, who include software giants IBM and Dell, will have to be nimble, green and innovative.

"You've got to work harder to keep your programs sold. You've got to keep your quality up and you're going to have to do things you haven't done in the past to encourage customers to continue to want to invest in your individual programs rather than look to find bill payers out of those programs," TechAmerica Foundation spokesman Dan Heinemeier said.

While he was describing the outlook for defense-related IT in particular, his words could apply to any tech company seeking government business.

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