Federal IT Spending Drops Slightly Against 2012 Requests, immixGroup Budget Briefing Reveals

Sequestration Will Require Cuts in Unobligated Spending; Agencies to Focus on Digital Government Strategy, Cloud Computing and Similar Cost Saving Technologies

McLean, VA, October 31, 2012 - In the face of looming sequestration, federal IT spending requests overall have dropped $1 billion over FY 2012 levels, with buying trends expected to emphasize mobility and cloud-related technology. The 2013 Federal IT budget request is approximately $78.9 billion—down slightly from last year’s $79.7 billion—but the continuing resolution and potential sequestration will most likely lower IT spend to between $73 to $74 billion.

These financial statistics and technology trends were unveiled at a Federal IT FY2013 Budget Briefing hosted by immixGroup on October 25. immixGroup’s Market Intelligence organization, which prepared the content of the briefing, provides actionable information that helps technology companies identify relevant opportunities to grow their federal business.

As in last year’s budget request, agencies are emphasizing cost savings through value measurement, process improvement, elimination of redundancy, and new technologies to improve operations. immixGroup’s Market Intelligence team attributes the budget reductions to a government-wide shift toward enterprise agreements and IT management reform, as well as requirements of the Budget Control Act.

“Sequestration will cap discretionary spending levels between 2013 and 2021, and will require overall spending cuts of $1.2 trillion,” said Stephanie Sullivan, Civilian Market Intelligence Consultant with immixGroup. “Some $38.5 billion will be cut in FY13, of which $8.92 billion will come from contract dollars. Large programs and contractor spending will most likely be affected as IT development shifts towards incremental progress and agile development practices to squeeze more value from limited dollars.”

In civilian agency spending, the clear drivers are the Digital Government Strategy and cloud computing. Under the Digital Government Strategy, agencies are becoming more information-centric and are shifting from managing “documents” to managing discrete pieces of data and content. There is an additional emphasis on shared platforms to reduce costs, streamline development, standardize practices, and ensure consistency. This will allow for a more customer-centric environment where end-users can shape, share, and consume information as they want. The aforementioned initiatives introduce security and privacy issues to which contractors have become increasingly sensitive. According to immixGroup, an analysis of 66 recent cyber security deals showed federal contractors are acquiring companies to expand capabilities in areas such as continuous monitoring, secure cloud computing, and mobile application security.

Cloud computing is continuing to gain momentum throughout government. Agencies are working to implement policies and contracting procedures to enhance its ability to move services such as email, data storage, and customer analytics to the cloud. The Office of Management and Budget is requiring agencies to itemize their cloud computing initiatives in fiscal 2014 budget plans.

Data Center Consolidation also continues to be a priority across agencies. The Federal Data Center Consolidation Initiative memorandum of 2011 set a schedule of deliverables to help meet a goal of consolidating at least 800 data centers by 2015, and agencies are working to meet this schedule. As one example, The Department of Treasury has increased its budget request to $3.5 billion, up from $3.2 billion in 2012, to support its goal of having 50 percent virtualized servers by 2015.

On the Department of Defense (DoD) side, interoperability and infrastructure consolidation are driving the direction of IT budgets. The DoD plans to reduce data centers from 770 to fewer than 100, and network operations centers from 65 to 25. The Joint Information Environment (JIE) initiative being promoted throughout DoD is expected to improve interoperability, share secure information, and lower costs across the department.

Most service branches are seeing at least nominal reductions in the IT budget requests. The Army’s FY 2013 budget request has shrunk by one percent over last year. Even so, it remains the largest IT budget of all federal agencies. Programs supporting tactical communications and special operations will most likely be safe from budget cuts.

One notable exception to this overall decrease is The Defense Information Systems Agency (DISA), which is seeing its IT budget rise by approximately two percent up to $5.13 billion. This is partly due to redistribution of funds from the military service branches to DISA as the DoD shifts increasingly toward enterprise and hosted services.

“Reduced spending is a clear theme across both defense and civilian agencies. They will now have to take a hard look at unobligated dollars for potential cuts,” said Tim Larkins, immixGroup DoD Market Intelligence Consultant. “Existing programs are more likely to see continued funding and new initiatives may be stalled or fail to get off the ground entirely. Product vendors and solution providers have to consider how their products serve existing programs – and, if possible, whether there’s a cloud-based approach to their offerings. Bottom line: vendors have to help their government customers do more with less.”

For complete information from the immixGroup Federal IT Budget Briefing, or to view an on-demand Webcast, visit www.immixgroup.com/FY13-civ-briefing and www.immixgroup.com/FY13-dod-briefing.

Contact:
Allan Rubin
Vice President, Marketing
immixGroup, Inc.
703.752.0658
allan_rubin@immixgroup.com

About immixGroup, Inc.

immixGroup helps technology companies do business with the government. The company’s four divisions deliver a unique combination of services for software and hardware manufacturers, their channel partners, and government agencies at the federal, state, and local levels. Since 1997, immixGroup has helped hundreds of large and emerging companies grow and manage their public sector business while providing its government customers with reliable access to leading commercial technologies through the contract vehicles and partners they prefer. For more information, contact immixGroup, Inc. at 703.752.0610, via email at info@immixgroup.com, or on the web at www.immixgroup.com.

immixGroup’s Market Intelligence organization provides actionable information on public sector sales opportunities for technology manufacturers, resellers, and solution providers. For more information, visit www.immixgroup.com/market-intelligence

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