Bloomberg News

Obama Budget Calls for Cuts in Spending for U.S. Technology

February 16, 2012

(Updates with industry plans in the ninth paragraph. For further information on the budget, see {BUDG <GO>}.)

Feb. 13 (Bloomberg) -- U.S. government spending on information technology would decline 1.2 percent next fiscal year under a budget proposal from President Barack Obama seeking to balance investments with deficit reduction.

The technology budget released today calls for $78.9 billion in spending next year, led by Defense Department reductions, as the administration promotes savings and efficiencies in federal-data programs. It’s part of a $3.8 trillion election-year budget plan sent to Congress.

“By doing more with less, the administration is driving savings across government and using those savings to reinvest in information technology and services that benefit the American people,” Obama said in a message accompanying the proposed budget for fiscal 2013, the year starting Oct. 1.

The Obama administration has been trying to hold federal IT spending steady while increasing government efficiency through the use of cloud computing and mobile devices. Information- technology expenditures rose 7.1 percent a year on average from 2001 to 2009 and “has effectively been halted” with no growth from 2009 to 2013, according to the budget.

Information-technology spending includes purchasing computers, protecting government data, updating websites and hiring employees who provide technical support. The reduced expenditures in 2013 will be driven by cutting the Pentagon’s information technology investments 3.6 percent to $37.2 billion next fiscal year, according to the budget.

‘Hot Areas’

Spending on information technology by major civilian agencies will increase 1.1 percent to $41.7 billion, the budget shows.

The budget plan demonstrates a commitment to initiatives in progress, which is good news for companies specializing in information technology products and services, said Alan Balutis, director of the Internet Business Solutions Group for Cisco Systems Inc., based in San Jose, California.

“The hot areas will be cloud computing, data-center consolidation, cybersecurity and mobile technology,” Balutis said in an interview. He served as chief information officer for the Commerce Department from 1995 to 2000 during the administration of President Bill Clinton.

Technology has largely stayed above the political fray heading into this year’s elections, Balutis said. Politicians generally haven’t attacked the idea of using technology to improve government services or a reliance on companies for services such as cloud computing, he said.

Innovation Focus

“There’s a growing bipartisan recognition that technology is the vehicle that allows you to transform the way the government does business,” he said.

TechAmerica, a trade association in Washington, considers the spending proposal to be a “significant commitment” in the budget to technology as total IT spending would be decreased, Trey Hodgkins, the group’s senior vice president for national security and federal procurement policy, said in an e-mail.

“This budget focuses on leveraging technology to increase efficiencies and savings,” he said. “While federal IT spending is going down, innovation in the federal government is going up. This is a very positive thing.”

The association represents companies including Apple Inc., Dell Inc. and International Business Machines Corp. Industry executives said they plan to review the budget to understand specific IT cuts or spending increases.

More Cloud Computing

The administration seeks to shift more federal applications to cloud-computing networks operated by contractors, a move aimed at saving money. The cloud is a Web-based pool of shared computing resources such as software and data storage.

Microsoft Corp., Google Inc., Amazon.com Inc. and IBM are among companies competing for U.S. cloud-computing contracts.

Forty services have moved to the cloud while another 79 are scheduled for transition by June 2012, according to the budget. More than 50 legacy systems have been eliminated.

“The adoption of cloud solutions has eliminated duplicative systems, while also integrating new levels of security, reliability, and functionality, to include collaboration, virtual meetings, and other innovations,” according to the administration’s budget.

The administration began the Federal Risk and Authorization Management Program in December to give U.S. agencies a one-stop shop when it comes to minimum security requirements and contracting language for cloud computing.

Spending Curbs

“The federal government spends hundreds of millions of dollars a year securing the use of IT systems in a duplicative, inconsistent, and time-consuming manner,” according to the budget.

The White House also plans to curb IT spending by shrinking the number of the data centers used by agencies to store large amounts of information.

The U.S. government expects to close almost 1,100 data center by 2015 to try to save $3 billion, according to the budget. The administration said it plans to close 525 data centers by the end of 2012.

“Moving forward, the government will shift to a newer operating model that requires agencies to review existing data- center capacity for use before investing in a potentially duplicative capability,” according to the budget.

The administration said it will take further steps to protect federal computer systems from cyber attacks by foreign governments and hackers.

Securing Federal Networks

The Homeland Security Department will work with agencies to identify areas in need of improvement to better defend computer systems and develop risk mitigation strategies.

“Threats to this infrastructure -- whether from criminal elements or nation-states -- continue to grow in number and sophistication, creating the potential that essential services could be degraded or interrupted, and confidential information stolen or compromised, with serious effects,” the administration said.

The budget didn’t provide an estimate for how much will be spent on cybersecurity in fiscal 2013.

The administration is also developing a strategy to ensure that agencies are efficiently buying and using mobile technologies like laptop computers, smartphones and tablets, according to the budget.

Agencies are increasingly using mobile technologies and need stronger policies for purchasing and securing devices, the administration said.

The strategy will be released in March and include guidelines for agencies to combine contracts for voice and data services, Steven VanRoekel, the government’s chief information officer, told reporters on a conference call today.

“We have agencies that have multiple contracts with the same carrier,” he said. “The prices are all over the map.”

--Editors: Steve Walsh, Michael Shepard

To contact the reporter on this story: Chris Strohm in Washington at cstrohm1@bloomberg.net

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


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