Deltek’s Federal IT Market Forecast Projects Spending Trends from 2021 to 2023
Published: July 21, 2021
Deltek projects the federal IT market will see modest growth as agencies emerge from the impacts of the COVID-19 pandemic to move forward on their IT priorities.
More than ever, the federal information technology (IT) landscape is a complex amalgam of rapid technological change and critical challenges alongside entrenched legacy infrastructure. Agencies are facing the challenges of diverse cybersecurity threats while working to emerge from the disruptive impacts of the COVID-19 pandemic. These and other challenges are impacting IT operations and resetting priorities of in-flight IT transformation and modernization efforts.
As the Biden Administration’s presidential management agenda begins to take shape, the administration is strongly emphasizing IT modernization, cybersecurity and investments in key technologies as critical mission enablers, presenting opportunities in systems modernization, cloud computing, artificial intelligence, data analytics, automation and cybersecurity.
Although the fiscal year (FY) 2022 budget proposes large increases to the discretionary budgets of nearly all civilian agencies and modest increases to the Department of Defense, IT budgets are much more varied and increases are more targeted. Consequently, agencies will remain under pressure in the coming years to increase efficiency, eliminate waste and demonstrate clear value for their IT investments.
Given these influences, Deltek forecasts federal spending on contractor-supplied Information Technology (IT) products and services will grow from $118.1 billion in FY 2021 to $119.9 billion in FY 2023 at a compound annual growth rate (CAGR) of 0.8%. (See chart below.)
Key themes emerging from Deltek's research include:
- Major Budget Cuts Unlikely. Given the efforts of Congress (Democrats) and the Biden Administration to make significant investments to address long-standing deficiencies (such as infrastructure and climate change), major budget cuts are unlikely within the forecast period.</li>
- IT Priorities Advance. Agencies continue to make progress in critical technology areas, including cloud, cyber, big data, AI, health IT, mobility/5G and network modernization. Vulnerabilities exposed during the COVID response add focus and urgency.</li>
- Cloud as Enabler. Migrating legacy systems to the cloud and/or purchasing cloud-based capabilities is now the de facto way agencies are modernizing their IT environments. However, many agencies must still address application rationalization, security and governance.</li>
- Cybersecurity Dominates. Vulnerabilities exposed by the SolarWinds hacks are driving increased cyber budgets and pushing agencies to take a harder look at zero trust, but implementing the architecture will require increased investment across all technology segments. CMMC will help drive contractor trust, but concerns about program costs and impact remain.</li>
- IT Modernization Funding. Agency focus on IT modernization remains high due to funding and process changes in the TMF. However, the pace of modernization leveraging those funds will depend on the TMF Board’s ability to review, approve and oversee modernization projects.</li>
Deltek's Federal Information Technology Market, 2021-2023 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.