Federal Agency Communications Capabilities Spending from FY 2014-2016
Published: April 05, 2017
Federal agencies are spending approximately $24M per year to modernize their communications capabilities.
Federal agencies have failed to modernize their information technology infrastructures, resulting in the continued use of antiquated and inefficient systems. More importantly, they have not been able to reduce spending more than 80% of their annual IT budgets on sustaining these legacy systems. The modernization picture is disappointing, but the news is not all gloomy because while legacy systems remain a concern there is at least one area where agencies appear to be making some headway – the modernization of their communications capabilities.
For the last three fiscal years, overall federal spending on Voice over Internet Protocol (VoIP) equipment, virtual desktop infrastructure, unified communications, and messaging capabilities is averaging at least $24.3M per year, with the figure for Fiscal Year 2016 coming in at $22M.
I write “at least” concerning average spending because one of the areas where agencies are utilizing modern communications solutions is in the gradual adoption of cloud computing. Cloud-based solutions like Microsoft’s market-dominating Office 365 contain core messaging capabilities that work across nearly all hardware platforms, and yet determining how much agencies are spending on what we here at Deltek call “Email/Bundled Communications” is challenging because these capabilities are not always specifically called out.
Keeping this in mind, here is the latest data we have on agency cloud-based Email/Bundled Communications capabilities spending over the last three fiscal years.
Considering the Federal Procurement Data System data in the first chart from a market sector perspective, we see that spending on modern comms capabilities has been strongest among civilian agencies by a factor of five over the last three years.
I attribute this dominance in the civilian agency space largely to the fact that most parts of the defense establishment are using Defense Enterprise Email and legacy Defense Connect Online capabilities provided by DISA. These will soon be replaced by the Defense Enterprise Office Solution, or DEOS, a unified communications capability DISA is contracting.
Lastly, here is the spending data from the first chart above from the perspective of the top ten agencies across both the civilian and defense sectors of the market.
Health and Human Services is clearly in the midst of a big effort to modernize its communications capabilities, while the Air Force is doing the same on the defense side. Notably, Army and Navy are spending next to nothing, so for the time being it looks like the most business opportunity will continue to be found among civilian agency customers, perhaps even with their budgets stalled and/or cut.