Deltek Predicts the Federal Market for IT Services to Remain Steady for the Next Five Years

Published: January 09, 2013

Big DataCloud ComputingCybersecurityData CenterForecasts and Spending

In an era of budget pressures along with requirements to increase efficiency and effectiveness, federal agencies will continue to need contractor supplied IT services to fulfill missions and support IT infrastructure. However, the long-term market outlook for such services will be flat or slightly declining.

According to our new report, “Federal Information Technology Services Market, 2012-2017,” federal spending by the U.S. government on vendor-furnished IT services will decrease from $60.9 billion in 2012 down to $60.4 billion in 2017 at a Compound Annual Growth Rate (CAGR) of -0.2%.  Federal IT services spending includes funding for IT professional services like program management, systems integration, software development and technology training as well as IT outsourcing of federal systems, applications and infrastructure.


Unlike other areas of federal IT which will be declining over the next few years, we believe the federal IT services market will remain flat as agencies continue to consolidate data centers, move to cloud computing, implement big data, and satisfy cybersecurity needs.  Deltek believes the market will grow over the next year and then contract and level off in the out-years reacting to federal technology priorities and the macro-budgetary environment:

  • Budget uncertainty will impact spending on IT and IT services.  Continuing Resolution and appropriations delays into second half of FY 2013 will sustain some program spending at FY 2012 levels, but stall new starts and push enhancement timelines.
  • Due to scrutiny of IT projects, competing priorities, and desire for quick ROI, agencies will reconsider the scope, scale, and priorities of IT programs.
  • Expect agencies to continue moving to smaller scale, phased IT projects that result in more frequent competitions and smaller awards.
  • Technology trends and initiatives such as cloud computing, data center consolidation, cybersecurity, and big data implementation will influence federal agency spending on IT outsourcing and IT professional services.

Select growth opportunities for IT services in the short term center around data center consolidation, cybersecurity, cloud computing, and implementing big data solutions.  These will help keep the market segment stable and potentially grow around specific areas of IT services while shifting funds from other, lower-priority areas.  Agencies continue to consolidate their data centers and will require continued contractor support to converge their infrastructure.  These efforts, along with moving to shared services, cloud computing, and more effective cybersecurity and data management, will sustain some measure of demand and present opportunities for services in these areas.


In the longer term, several disruptive technology trends and related policies increasingly impact the mix and make-up of the IT services market segment, softening overall demand.  As cloud gains wider adoption and agencies move to an IT-as-a-service model, there is less need for customized solutions and integration services leading to changes in the types of IT to be outsourced in the future. Further, policies driving efficiencies and economies will continue to put pressure on labor rates, making the competitive landscape even fiercer.


Further information on federal IT services spending is available in Deltek’s “Federal Information Technology Services Market, 2012-2017” report.  The report includes a forecast of federal contracted spending on IT services and the current contract landscape at the top ten federal departments.