Bloomberg News

Tighter U.S. Budget to Strain Technology Vendors, Group Says

October 17, 2011

(Updates with figures from group’s report in third paragraph.)

Oct. 17 (Bloomberg) -- U.S. government purchases of information technology will decline slightly through 2017 as budget pressures prompt agencies to contain spending, according to an industry group’s forecast.

Companies that sell computers and software to U.S. agencies will need to meet increased demand for wireless and cybersecurity products to stay competitive, according to the forecast from TechAmerica, a Washington-based organization that represents companies including Google Inc. and International Business Machines Corp.

Technology spending by the civilian agencies on an annual basis will remain flat at $43 billion in the next five years and defense spending on information technology will drop to $35 billion by 2017 from $38 billion in 2012, after adjusting for inflation, according to the report.

President Barack Obama’s administration has sought to reduce technology purchases by closing government data centers and shifting systems to cloud computing, which lets multiple users share computing resources including applications and data storage.

The administration’s effort to trim technology spending coincides with broader budget deliberations in Congress by a bipartisan supercommittee of 12 lawmakers that is seeking $1.5 trillion in overall savings.

Efficient Use

Agencies will focus their increasingly limited budgets on making more efficient use of technology, boosting demand for enterprise software, cloud computing and other shared services, according to the TechAmerica report. Harris Corp. and Hewlett- Packard Co. are among the government contractors that are developing services to meet those needs.

Companies that provide information-security services will also have more procurement opportunities as the government works to “minimize risks and vulnerabilities” of new technologies and focuses on identity management and authentication, according to the report.

The government has increased its focus on information security in light of recent data breaches at Sony Corp. and Lockheed Martin Corp. Last month, tapes containing medical records for 4.9 million patients in the U.S. military health- care system were stolen from an SAIC Inc. employee’s car.

Agency efforts to increase employee mobility will drive demand for security on wireless devices and those devices’ connections to the government’s networks, according to the report.

“IT consolidation is critical for budget, operations and security, but is constrained at department level” in the Pentagon by legislative requirements, according to the TechAmerica report.

The defense IT spending forecast doesn’t include a “significant amount of IT associated with mission systems,” which means that the IT budget represents only a fraction of the technology purchased by DOD, according to the report.

--Editors: Michael Shepard, Steve Geimann

To contact the reporter on this story: Juliann Francis in Washington at jfrancis31@bloomberg.net

To contact the editor responsible for this story: Michael Shepard at mshepard7@bloomberg.net


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