Report: Fed Spending Slows

Government work is a staple of the IT industry, including the storage networking segment. But according to a recent report from Input, a consultancy specializing in the federal market, the U.S. Government will spend less next year on technology.

The report says the U.S. Office of Management and Budget released information this week that shows federal agencies will spend $59.8 billion on IT gear in 2005. Big bucks, surely; but Input was expecting $62 billion.

What's more, the 2005 spending request, submitted by the OMB as part of the President's annual budget, represents just 1 percent more spending than what's expected for 2004. While that sounds small, the sheer volume of the government IT market makes it more significant.

"The federal IT budget over the past five years has been growing at a rate uncharacteristic for the government marketplace," says Payton Smith, manager of public sector IT market analysis at Input. "We were expecting some moderation. But this is more moderation that we expected to see."

Government agencies increased spending prior to the Year 2000 changeover and also pumped funds into technological improvements after the September 11, 2001, terrorist attacks. But Input says government agencies are moving out of the sense of crisis that led to the spending uptick. What's more, projects such as the OMB's Federal Enterprise Architecture plan are cutting down on duplication of technological effort from department to department that used to inflate government spending figures.Despite these caveats, the government market remains one that IT companies look to with longing and rejoice in when contracts are awarded (see NASA Picks BakBone for Mars Mission, EMC Wins $40M Pentagon Contract, LeftHand Tallies Government Wins, KVS Certified by Dept. of Defense, and US Army Enlists Storage). And Input says the work is still coming, even if growth is falling below expectations.

There also are pockets of opportunity. The Department of Homeland Security, for instance, spent $4.4 billion on IT gear in 2003, 47 percent more than it actually estimated for that year. Other big spenders continue to be the defense agencies, such as the Army, Navy, and Air Force, each of which has requested over $5 billion in IT spending for their 2005 budgets.

There also are IT opportunities at the state government level. According to Input, state agencies will spend about $47 billion in 2004 on IT gear.

Mary Jander, Site Editor, Byte and Switch