Mar 10 2017

Federal IT Spending Is Expected to Decline in 2017, Forrester Reports

Even if the federal technology budget shrinks, spending on the cloud is expected to increase, the research firm says.

It remains unclear how much President Donald Trump will request for spending on federal IT in his fiscal 2018 budget proposal, but funding for technology is expected to decline slightly after years of steady increases, according to a recent report from Forrester Research.

Former President Barack Obama’s final budget proposal requested $89.9 billion for IT, representing a 1.3 percent increase from fiscal year 2016, including $19 billion for cybersecurity. Congress wound up appropriating most but not all of that figure.

The Forrester forecast predicts that tech spending by agencies will decline this year by 0.1 percent to roughly $86 billion, according to The Wall Street Journal. Next year, federal IT spending will fall another 0.6 percent to $85 billion, the research firm’s report said. Those figures include everything from hardware to software, networks, consulting and outsourcing, the Journal notes.

By comparison, federal IT spending grew an average of about 2 percent annually between 2013 and 2016, including a 32 percent bump in 2015, according to the Journal.

What Is in Store for the Budget?

The government is currently operating on a continuing budget resolution, which expires in April, the Journal notes. At that point, fiscal year 2017 will be more than halfway over. Even if Trump’s budget plan does call for higher tech spending or more targeted IT investments, those projects likely will not manifest until 2018, according to the Forrester report.

Federal officials and outside IT analysts are divided over whether Trump’s budget proposal will spur or hamper IT modernization.

Reports indicate that the budget proposal will call for a $54 billion increase in defense spending while requesting cuts of the same amount to non-defense discretionary spending. However, the administration is not expected to release its formal budget blueprint until next week.

Spending on Cloud Expected to Grow

According to the Forrester report, cuts to computer hardware and communications equipment and services will outweigh spending increases on software, consulting and outsourcing services.

One area that is expected to see more investment is in cloud computing, reports Forrester. Total federal spending on cloud solutions is expected to reach $2.1 billion this year, up 2.6 percent from 2016, when cloud spending jumped by 3.2 percent.

Increased cloud adoption allows agencies to cut costs on fixed computing and server infrastructure. It also allows them to consolidate data centers.

Ray Bjorklund, president of government IT market research firm Birchgrove Consulting, told Computerworld last month that he expects Office of Management and Budget Director Mick Mulvaney to propose across-the-board budget cuts “somewhere around 10 percent,” which will lead to cuts in IT spending.

However, such decline “may be bearable” in the short term, Bjorklund says, because of decisions by both former President George W. Bush and Obama to prioritize IT infrastructure consolidation and modernization.

“Initiatives like data center consolidation and adoption of cloud services — even though not completely successful — have set the table for leaner spending," Bjorklund says.

Meanwhile, Federal Times reports: “Forrester’s advice to federal CIOs is to reduce project portfolios to focus on customer-related projects, renegotiate wherever possible and replace existing technology systems with lower-cost alternatives, including open-source and cloud resources. Proven improvements in customer experience can build the case for tech budget increases.” 

Adam Gault/ThinkStock

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