Deltek’s Federal IT Market Assessment Forecasts Spending Trends Through 2028

The federal IT environment continues to operate and adapt amidst a complex economic and geopolitical landscape. Agencies are working to make progress in core areas, such as IT modernization, cybersecurity and cloud computing, while concurrently developing new capabilities in artificial intelligence, analytics and automation. Within this context of fast-changing geopolitical and economic forces, the federal IT landscape is an increasingly complex combination of future potentials and current needs, as agencies seek to embrace emerging technologies while also sustaining or modernizing their legacy infrastructure.

These are among the observations in our latest market analysis report, Federal Information Technology Market, 2024-2028, which takes a strategic view of the government-wide market trends, policies and principal initiatives that will shape federal information technology spending over the next five years.

In its policies and budget priorities, the Biden Administration continues to emphasize IT modernization, cybersecurity and investments in key technologies as vital to achieving crucial agency missions, essential citizen services and significant government-wide objectives. This technology agenda presents sustained and sundry opportunities in systems modernization and support, cybersecurity, cloud computing, data analytics, artificial intelligence, process automation and others. As a mission enabler, IT remains a substantial part of a broad scope of programs across professional services, R&D, defense & aerospace and operations & maintenance activities, as IT capabilities are embedded into varied and widespread programs, often beyond traditional IT areas.

Given these diverse influences, Deltek forecasts the federal IT market will experience steady but uneven growth over the next five years as agencies seek to invest in IT capabilities that add new operational capacities and effectiveness, and address multiple administration technology priorities and mandates.

Deltek forecasts federal spending on contractor-supplied Information Technology (IT) products and services will grow from $131.0 billion in FY 2024 to $156.1 billion in FY 2028.

Key themes emerging from our research include:

• IT Modernization Tops Priorities. Agencies continue to prioritize investments in critical technology areas, including cloud, cyber, big data, AI, health IT, mobility/5G and network modernization. Computing as a service, AI and machine learning, and zero trust environments are becoming of increasing importance as agencies modernize.
• CMMC on the Horizon. DOD’s ongoing development of their Cybersecurity Maturity Model Certification (CMMC) program continues, as specifics of the related program and acquisition rules remain in review at DOD and OMB. The program appears to be on track to launch in late 2024, or more likely in early 2025, but many specifics are TBD.
• Agencies Laying the AI Groundwork. Federal AI adoption continues to expand, particularly as agencies begin to adopt generative AI solutions. Policy and regulation are key driving factors to further AI federal expansion. As agencies continue to install Chief AI Officers and develop strategies, the number of federal AI use cases will rise to assist in agency modernization and operations.
• Domination of SaaS. Investment in Software-as-a-Service continues to outpace spending on every other type of cloud service. The GSA has acknowledged this trend and introduced changes to acquisition rules, such as giving contracting officers the ability to buy SaaS on a consumption model.
• Focus on Software Development. Agencies continue focus on DevOps, DevSecOps, human-centered design and the use of APIs and microservices in software development practices and modernization efforts.
• Embedded IT Grows. Spending for key technologies such as AI/ML, analytics, cybersecurity and sensor technology is increasingly embedded within non-IT programs, representing contractor opportunities beyond those funded by agencies' primary IT budget requests.

Final Thoughts

The last bullet above highlighting the growth in embedded IT bears some additional emphasis. The priority among agencies to test and adopt emerging technologies for diverse purposes and at various levels across organizations is reflected in IT spending within programs that are non-traditional or non-IT-centric initiatives. The rush to embrace these technologies will take time to mature and be governed under agency IT budgets, but some programs will never get there because the IT elements are such a small portion of the whole. Further, the embedding of IT capabilities ever more deeply into every operational capacity within organizations results in IT spending outside an agency’s enterprise IT budget.

This embedded element must not be overlooked by contractors, who may find opportunities for their solutions or services in adjacent areas that fall outside their traditional types of work.

For more details, check out Deltek's Federal Information Technology Market, 2024-2028.