MA

DISA’s FY 2015 IT Budget: Implications for Industry

Published: June 03, 2014

Communications ServicesDEFENSEDISAForecasts and SpendingJoint Information Environment (JIE)Strategic Sourcing

DISA is projected to receive billions of dollars in FY 2015 for IT services it provides to the rest of the Department of Defense. Given the importance of the Joint Information Environment, DISA’s role as enterprise IT provider is expected to grow even more in the years after fiscal 2015. The shift toward DISA has profound implications for Defense IT spending as a whole, requiring that industry partners seeking to do work with Defense customers adjust their business development strategies accordingly.

The Defense Information Systems Agency (DISA) is playing an increasingly important role in Defense IT, a role that is expected to grow with maturation of the Joint Information Environment (JIE).  Funding for DISA’s programs garners a lot of attention, therefore, as vendors seek to understand where contract dollars in the agency’s IT budget may be going and which Defense organizations are buying DISA’s services.  Today’s post takes a look at the broad outlines of DISA’s budget for upcoming fiscal year 2015 and breaks down some salient points vendors need to know.

DISA’s IT Budget in Context

Before diving into the numbers it’s worth taking some time to understand where DISA’s IT budget fits into the broader IT budget for the Department of Defense.  Figure 1 below shows the Defense-Wide IT budgets for FY 2014 and 2015 alongside DISA’s IT budget for those same years.

Why the big drop in DISA’s FY 2015 IT budget if the agency is assuming a bigger role providing enterprise IT services?  Simple, it’s because the DoD CIO changed the way it calculates the Defense Working Capital Fund in the FY 2015 budget.  For FY 2015, funding is now identified in the ‘senders’ accounts (i.e., Defense customers) rather than the investment owner's (i.e., DISA’s) account.  Therefore, the FY 2015 IT budget number for DISA shown in Figure 1 includes $1.85B for the Defense Working Capital Fund.  In FY 2014 this number was $3.9B because it included operations costs for investments not under DISA’s operational control.

Assuming, however, that the proportion of operational costs reflected in DISA’s FY 2015 number were roughly the same in FY 2014, we can conclude that DISA’s IT budget typically makes up 29% of the total Defense-Wide IT budget annually.

Defense Customer Appropriations – Computing Services

Moving now to the specific services that DISA provides, Figure 2 shows what Defense customers have “appropriated” (i.e., spent) or intend to spend on DISA’s computing services from FY 2013 to FY 2015.  The computing services DISA supplies include Core Data Center services, DoD Enterprise Email, DoD Enterprise Portal Service, GIG Content Delivery Service, and the agency’s new milCloud infrastructure service.  The data for these services reveals a few interesting trends.

First, Army and Air Force appropriations have jumped significantly in the last two years.  This should come as no surprise both Services have fallen solidly behind implementing the JIE.  Army’s appropriations will rise by 52% from $112M to a projected $170M.  Air Force’s appropriations show a slightly larger increase percentage-wise, rising 52.5% from $101M to a projected $154M over the same period.

Second, Defense-Wide appropriations show massive jump on a percentage basis of 132%, from $25M to a projected $58M, indicating that the Defense Agencies are also enthusiastically embracing the enterprise services provided by DISA under the JIE concept.

Third, Navy and Marine Corps appropriations register as relatively flat or declining.  In the Marine Corps’ case, there is a small jump of 3.6% from $28M in FY 2014 to a projected $29M in FY 2015.  Conversely, Navy appropriations show a modest increase of 3% over the same period from $32M in FY 2014 to a projected $33M in FY 2015.  It is worth noting, however, that from FY 2013 to FY 2015, Navy appropriations show a decrease of 5.7%, from $35M to a projected $33M.

In short, while Navy officials may publicly toe the line with respect to the JIE and enterprise services provided by DISA, the data does not reflect growing support financially.  If anything, the data reflects the Navy’s intent to continue down its own path with NGEN.

Defense Customer Appropriations – Telecom/Enterprise Acquisition Services

Turning now to DISA’s transport and enterprise acquisition services, Defense customer appropriations show trends similar to those in computing services.  As Figure 3 shows, use of DISA for telecom and acquisition support has risen significantly over the last three years.

Army’s appropriations show the greatest growth, rising 38.5%, from $1.55B in FY 2013 to a projected $2.1B in FY 2015.  Air Force’s appropriations over the same period show similar growth, rising roughly 30% from $1B in FY 2013 to a projected $1.3B in FY 2015.  Even Navy’s use of DISA transport and acquisition services has increased, rising 10.3% from $560M in FY 2013 to a projected $618M in FY 2015.  Finally, growth of Defense-Wide appropriations has also accelerated, rising 8.5% from $423M in FY 2013 to a projected $459M in FY 2015.

Implications

The data discussed above has several implications that are critical for vendors:

First, the DoD’s shift to enterprise IT services and rollout of the JIE is real.  This trend has momentum and is expected to accelerate.  Even contracting is being affected.  For example, anyone following Army procurements in particular (i.e., Unified Capabilities) has noticed the shift toward using DISA’s contracting services more frequently.

Second, a greater, in some cases much greater, percentage of Defense IT dollars are being spent at DISA and not on contracts with vendors.  Army, for example, is projected to spend $2.3B with DISA in FY 2015 while Air Force is projected to spend $1.46B and Navy is projected to spend $651M.  This is real money being taken out of the Defense IT market.  Those who benefit are vendors already working at DISA.  Given the amount of funding flowing into DISA, the agency is rapidly becoming the number one recommended focus for business development related activity.  Any company seeking to sustain itself in the IT business at DoD must devote more time, funding, and staff to developing relationships and shaping requirements at DISA.

Third, for the time being the Navy is an exception to this trend, as it continues to chart its own course.  Navy is already proving this with its use of Amazon Web Services to host large collections of unclassified data.  This situation may change in the near future, if comments by Navy officials are any indication.  Until then the potential business opportunity is greater with Navy than with the other Military Departments.