Research group predicts moderate growth in IT spending during next five years

Federal spending on technology will continue to grow during the next five years, but at a slower than average pace, according to market research firm INPUT.

The Reston, Va.-based INPUT released its five-year Federal IT Market Forecast on Monday, predicting that government spending on technology would grow at an average annual rate of 3.9 percent between fiscal 2008 and 2013, from $80.8 billion to slightly less than $100 billion.

During the past two decades, the average annual growth in IT spending has been approximately 7 percent. Spending jumped to almost 12 percent between 1998 and 2003 as a result of Y2K preparation and the Sept. 11, 2001, terrorist attacks.

The relatively low levels of spending growth predicted in the technology sector are related to the upcoming change in administration, the economy and budgetary realities, INPUT analysts reported: "In short, the federal government must navigate the transition of power during both an active and expensive war and a souring national economy."

Authors John Slye, Deniece Peterson and Richard Colven identified several other factors that likely would affect tech spending during the next five years, including a greater focus on better technology management and a changing acquisition environment. Slye and Peterson said Monday in an interview that the next president's management priorities, as well as legislative contracting provisions, will shape how and to what extent the government spends money on technology.

"A big part of this president's management agenda has been about increasing government performance and improving management," Peterson said. "Those concepts aren't going anywhere; efficiency and cost savings, that's a major driver."

Slye said agencies also will be under pressure to improve their IT management as competition for discretionary spending increases.

While emphasizing that the new administration and Congress will have tough fiscal choices to make, INPUT projected continued growth in discretionary spending. As mandatory spending continues to increase -- squeezing discretionary spending -- the next president and appointees will have to pay for their flagship initiatives with discretionary spending, Slye said.

"A president is going to want to put his or her stamp of personality on where the government is going, so we will see continued growth [of the discretionary budget]," he said.

INPUT predicted that greater government reliance on IT will provide more opportunities than ever for contractors during the next five years. The report forecasted a 4.1 percent growth rate in what INPUT calls the "addressable market" for contractors. As spending is expected to increase, the federal workforce is expected to hold steady or even decline, increasing the reliance on contractors.

"If the scope of the government mandate continues to grow and you don't have the people to get the work done, the natural option is look for partners in industry," Slye said. "It's a continuation of the trend."