RESTON, Va., Feb. 10, 2011 /PRNewswire/ -- Amidst the prospects of massive federal budget restrictions to reduce the national deficit, the information technology (IT) service industry is anticipated to keep its vitality from FY 2010-2015. Owing to the heightened need for infrastructure consolidation to support cost savings and the increasing use of IT as a facilitator for efficiency improvement, IT services vendors can expect to escape severe decreases in contracting opportunities for this time period. Although the president's FY2012 budget, planned for release next week, reportedly calls for a ten percent reduction in professional and technical services contracts, many of the areas being evaluated for cuts are non-IT related, such as cost benefit analysis, policy review, program evaluation and management services. A new study released by INPUT's industry analysts, Federal IT Services Industry Outlook, 2010-2015, reveals that demand for vendor-furnished IT services by the U.S. government will increase from $38.1 billion in 2010 to $51.7 billion in 2015, creating strategic openings for contractors after the release of the FY 2012 federal budget request.
"What we are seeing is a fairly minimal short-term impact in the IT services contracting sphere relative to other areas of contracting," noted John Slye, INPUT principal analyst. "Due to contemporary demands including data center consolidation, enhancements in cyber security and national trends toward cloud computing, the IT service industry will be equipped to bear the force of federal cuts better than others." The report identifies key drivers such as increased demand for efficiency-saving systems, and a higher level of open communication between government and industry, where IT innovation will play a huge role. Further supporting Slye's evaluation, the Federal Data Center Consolidation Initiative (FDCCI) issued by Federal Chief Information Officer (CIO) Vivek Kundra in February 2010, aims to decrease waste of underperforming agencies and re-allocate the savings to mission area departments that are supported by IT. The ensuing reduction will become a huge propellant for the IT marketplace, requiring an increase in the need for systems operations upgrades in addition to consulting services.
Though relatively unscathed, this segment of contracting can still be negatively impacted by certain federally defined trends. For instance, the "Cloud First" policy, despite creating opportunities to customize "light" technology and enhance shared services, will also jeopardize outsourcing amongst agencies. "While IT contracting is not expected to be greatly impacted within the next five years, we will see an increased scrutiny of service providers," said Angie Petty, INPUT principal analyst. "This may consequently limit options for suppliers who cannot meet the requirements for increased cost control, reporting and transparency." INPUT's report explains that agencies face difficult decisions regarding whether to outsource and save costs or to insource work forces and more easily meet government guidelines.
The report also states that IT services will be needed to manage growth in sectors such as:
- Business intelligence and process automation
- Data proliferation and mobility
- Service-oriented architecture
Podcast Availability: Interview with Slye about IT Services Market is available: http://ITServicesPodcast.input.com
Report Author: Slye and Petty are available for media inquires.
Report Availability: Federal IT Services Industry Outlook, 2010-2015 is available on INPUT's website at the following link: http://ITServicesReport.input.com/
INPUT, the authority on government business, was acquired by Deltek in October 2010. Established in 1974, INPUT helps companies develop federal, state, and local government business and helps public sector organizations achieve their objectives. More than 2,000 member organizations, including small specialized companies, new entrants to the public sector, and the largest government contractors and agencies, rely on INPUT for the latest and most comprehensive government procurement services and market information, consulting, powerful sales management tools, and educational and networking events. For more information about INPUT, visit www.INPUT.com or call 703-707-3500.
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