Deltek’s Federal IT Market Forecast Projects Spending Trends from 2020 to 2022

Key Takeaways

• Although agency budget uncertainty remains, Congress is unlikely to enact major budgets cuts while the economy is unstable. The topline budget for FY 2021 has already been negotiated, though Congress could enact some changes to help agencies address budget shortfalls and/or address ongoing COVID-19 response issues within regular appropriations.
• Historically, federal IT budgets and spending have been somewhat insulated from Congressional efforts to reduce the federal deficit or lower federal spending. The pandemic response has underscored the role of IT as a mission enabler.
• COVID-19 operational disruptions have driven some rapid IT modernization efforts, such as scaling of remote access and telework capabilities, and emphasized the importance of cloud computing, which should drive investment in cloud capabilities and modernized network infrastructure.

The Federal IT landscape is facing unprecedented challenges. While in the midst of broad transformation and modernization efforts agencies are facing the disruptive impacts of the COVID-19 pandemic. As a consequence, agencies are working to adapt to pressing needs while keeping longer-term initiatives on track.

The Trump Administration’s presidential management agenda calls on agencies to modernize their IT environments. To that end, cloud computing and the outsourcing of agency networks – along with the use of advanced analytics, artificial intelligence and modernized cybersecurity practices – are key areas of growth in the federal IT space.

Although the Bipartisan Budget Act of 2019 provided higher near-term funding, agencies will remain under pressure in the coming years to increase efficiency, eliminate waste and adopt emerging technologies that promise to improve service-delivery.

Forecasting the Federal IT Market in a COVID-19 Context

Due to the unique circumstances of the COVID-19 pandemic and its evolving impact on the federal IT market, we took a different approach to this year’s forecast by narrowing the focus to the near-term years, forecasting for FY 2020–2022. We also developed the “best,” “worst” and “most likely” IT budget scenarios, accounting for the many unknown factors and uncertainty surrounding future federal budgets due to the pandemic.

Deltek anticipates that the federal IT market will show very modest and uneven growth over the next few years as agencies deal with the repercussions of the COVID-19 pandemic on their operations while working to move their IT priorities forward.

Given these varied influences, Deltek forecasts federal spending on contractor-supplied information technology (IT) products and services will grow from $116.6 billion in FY 2020 to $118.3 billion in FY 2022 at a compound annual growth rate (CAGR) of 0.7%. (See chart below.)

Key themes emerging from Deltek's research include:

• Budget Ambiguity. Although uncertainty remains, Congress is unlikely to enact major budgets cuts while the economy is unstable. The topline budget for FY 2021 has already been negotiated, though Congress could enact some changes to help agencies address budget shortfalls and/or address ongoing COVID-19 response issues within regular appropriations.
• Insulated IT Budgets. Historically, federal IT budgets and spending are somewhat buffered from Congressional efforts to reduce the federal deficit or lower federal spending. The pandemic response has underscored the role of IT as a mission enabler.
• COVID-19 Impacts. COVID-19 operational disruptions drove rapid IT modernization efforts, such as scaling of remote access and telework capabilities, and emphasized the importance of cloud computing, which should drive investment in cloud capabilities and modernized network infrastructure.
• IT Priority Progress. Agencies continue to make progress in critical technology areas, including cloud, cyber, big data, AI, health IT, mobility/5G and network modernization.
• Category Management. Category management and contract consolidation efforts are driving price points down for commodity IT.

Deltek's Federal Information Technology Market, 2020-2022 takes a 3-year strategic view of the trends, drivers and inhibitors impacting federal information technology procurement. The scope of analysis includes traditional IT as well as embedded IT spending within non-IT programs. The report explores market drivers, strategic programs, key initiatives and forecasts federal information technology spending over the next few years. The report provides growth projections for vendor-supplied products and services as well as identifies the unique issues driving individual market segments and agencies.