Federal Defense and Intelligence IT Market, 2022-2024
Published: July 08, 2022
Deltek's Federal Defense and Intelligence IT Market, 2022-2024 report analyzes the government-wide market factors, policies and principal initiatives that will shape federal defense and intelligence information technology spending over the next three years.
Deltek forecasts federal defense sector spending on contractor-supplied Information Technology (IT) products and services will grow from $55.8 billion in FY 2022 to $60.7 billion in FY 2024. Deltek forecasts federal intelligence sector spending on contractor-supplied Information Technology (IT) products and services will grow from $10.7 billion in FY 2022 to $11.1 billion in FY 2024.
The federal defense and intelligence IT communities operate within a complex geopolitical, economic and organizational environment. In the midst of rapid technological change, these U.S. national security components continue to pursue IT capabilities as critical mission enablers, presenting opportunities in systems modernization, cloud computing, cybersecurity, artificial intelligence, data analytics, and automation. As a mission enabler, IT is a critical part of a broad range of professional services, R&D, defense & aerospace and operations & maintenance programs.
Deltek forecasts the federal defense and intelligence IT market sectors will continue to show moderate and uneven growth over the next few years as departments and agencies continue to emerge from the COVID-19 pandemic, advance their cybersecurity capabilities, and invest in IT that both creates efficiencies and adds new operational capacities.
Defense Sector Key Findings
- Inflation Impacts. Defense authorities are sensitive to the growing impact of inflation on the Defense Industrial Base and are adjusting some contract clauses accordingly to accommodate contractor concerns. Inflation is exacerbating shortages down through contractors' supply chains and driving up their cost of delivery.
- Small Business Challenge. The number of small businesses supporting the DOD is declining annually. DOD is working on a strategy to reverse this trend but rising inflation and supply chain stress present significant headwinds.
- Non-traditional Contracts. The Defense Department continues to leverage non-traditional contracting methods to procure innovations. Spending on prototypes procured using Other Transaction Agreements (OTAs) fell in FY 2021 due to the end of several large prototype programs, however the use of Commercial Solutions Offerings (CSOs) continues to rise, with 93 awarded in FY 2021 worth $1.9B.
- Cloud Growth. Defense spending on commercial cloud computing, including cloud-based software development, is growing. Award of the JWCC contracts in December 2022 will establish enterprise IaaS and PaaS environments for the DOD and facilitate the closure of some general purpose clouds and the migration of some workloads migrated to JWCC providers as the DOD consolidates cloud contracts.
- Cyber Priorities. DOD's cyber budget request is at historic highs, growing from $9.8B in FY 2021 to $11.2B in FY 2023. The requirement for DOD components to adopt a continuous authorization to operate (cATO) approach on all cloud systems - to enable both real-time continuous risk monitoring and active cyber defense capabilities - will help pave the way for zero trust architectures.
- Vendor Cybersecurity Scrutiny. DOD's revisions of their Cybersecurity Maturity Model Certification (CMMC) program impact its structure, requirements and timeline, while maintaining its focus on NIST standards. The tempo going forward will be set by DOD's pace of updating federal regulations implementing CMMC requirements.
- Data for Decisions. Efforts to leverage advanced analytics for decision making insight are ongoing at all levels of the DOD. Spending on business intelligence, cybersecurity and geospatial analysis continues to lead advanced analytics use across the DOD.
- Artificial Intelligence Integration. Military departments are increasingly integrating AI/ML capabilities into warfighter missions, often leveraging OTAs. Spending on OTAs for AI/ML projects rose to a new high of $198M in FY 2021. With the growing investment in AI/ML, DOD's new Chief Digital and AI Office (CDAO) is tasked with providing remedies for recognized weaknesses in AI governance.
Intelligence Sector Key Findings
- Innovation Imperative. Intelligence agencies' overall budgets and IT budgets remain strong; however, the speed of technological advancement, data growth, and ever-increasing tech-savviness of adversaries makes it imperative that the IC employ innovation and IT, and strive for efficiency while detecting, evaluating and combating the threat landscape.
- Threat Landscape. As U.S. threat landscapes continue to expand in areas such as cyber space, the Internet of Things, space and even within organization ranks, IC demand for technology, tools, and information to predict, monitor and combat adversary behavior will remain strong.
- Workforce Reforms. The IC is focused on diversity, transparency, and innovation within its workforce, including efforts to recruit and retain talent. While the IC is working to reform personnel practices, contractors may find opportunities to fill workforce gaps.
- Acquisition Changes. Intelligence agencies are embracing use of more commercial products, services, data and OSINT while also working to speed acquisition through approaches such as bailment agreements, challenge competitions, OTAs, and CRADAs.
- Broad Technology Priorities. IT priorities in the IC include artificial intelligence, cybersecurity, data management, cloud computing, big data analytics, quantum technology, modeling and simulation, augmented and virtual reality, and partnerships with industry and academia to enable IC mission fulfillment.
Critical Insight for Vendors
Deltek's Federal Defense and Intelligence IT Market, 2022-2024 report takes a strategic 3-year look at the trends, drivers, and inhibitors shaping federal information technology procurement. The scope of Deltek's analysis includes traditional IT and embedded IT spending within non-IT programs.
The report provides:
- Insight into the factors, policies, and technologies shaping the market landscape over the next three years.
- Insight into the dynamics shaping IT market segments and agency spending.
- Insight from industry and government thought leaders.
- Market forecasts to support vendors' strategic planning.
- Recommendations to help contractors evaluate the impact of trends on their businesses.
Deltek's Federal Defense and Intelligence IT Market, 2022-2024 report is delivered in PowerPoint® format, including a PowerPoint® Executive Briefing, and an Excel® data workbook.
Deltek's New Forecast Features
Forecast Report Series
This is the second in Deltek's new three-part Federal IT Market forecast series, designed to provide a comprehensive view of the overall federal IT landscape as well as deeper agency level analysis.
- Federal Information Technology Market Landscape, 2022-2024
- Federal Defense and Intelligence IT Market, 2022-2024
- Federal Civilian IT Market, 2022-2024
New Forecast Segmentation
Deltek has revised its forecast segments to align with the federal Technology Business Management (TBM) framework. This revision allows us to align our forecast and market segmentation with the taxonomy and mechanisms used by federal agencies to categorize their IT programs and activities. See the report Scope and Methodology for more detail.
FEDERAL DEFENSE AND INTELLIGENCE IT MARKET, 2022-2024
TABLE OF CONTENTS
- Report Purpose
- Scope and Methodology
- Market Segment Definitions
- Key Findings
Defense IT Market
- Budget Environment
- Policy Environment
- Acquisition Environment
- IT Priorities and Policy Drivers
Defense Sector IT Forecasts
- Factors Impacting Spending Trajectory
- Total Defense Sector IT Addressable Market
- Addressable Market by Technology Segment
- Business and Application Development Software
- Software Development
- Computing Equipment
- Computing Support Services
- Communications/Network Equipment
- Communications/Network Services
- End User Equipment
- End User Support Services
- IT Management
- IT Service Delivery Management
- Platform Support and Integration
- Data Center
- Embedded IT
- Security and Compliance (Note: *This segment is for informational purposes only. Given historical spending for security-related products and services, Deltek believes there is significant under reporting of security and compliance contract obligations this segmentation.
Defense Agency Analysis and Forecasts
- Air Force
Intelligence Community IT Market
- Budget Environment
- Policy, Acquisition and Workforce Environment
- IT Priorities and Policy Drivers
Intelligence Agency Analysis and IT Market Forecasts
- Total Intelligence Community IT Addressable Market
- Intelligence Program IT Addressable Market
- Addressable Market by Technology Segments
- IT Professional Services
- Communications/Network Services
- Major Market Influencers
Intelligence Agency Analysis
Conclusions and Recommendations
- Intelligence Community Background
- Terms and Definitions