Deltek forecasts federal spending on contractor-supplied Information Technology (IT) products and services will grow from $144.5 billion in FY 2026 to $164.6 billion in FY 2029.

The second Trump Administration has positioned technology investment as central to its broader goals of agency efficiency, national security and U.S. global competitiveness. However, the federal IT market is navigating a period of structural change driven by a convergence of policy, technology and fiscal forces. The push to modernize legacy systems and adopt advanced technologies continues, but now takes place alongside unprecedented scrutiny of federal spending, sweeping workforce reductions and active consolidation of IT contracts and acquisition vehicles under GSA. Agencies are advancing core priorities such as cybersecurity, cloud computing and data optimization while simultaneously absorbing the impacts of budget reconciliation, DOGE-driven efficiency directives and shifting appropriations landscapes. Within this environment, artificial intelligence (AI) has emerged as both the defining technology opportunity and a core policy imperative, reshaping how agencies approach everything from mission operations to back-office functions and driving new demands for data infrastructure, computing capacity and governance frameworks.

The administration’s technology agenda is shaped by priorities including artificial intelligence dominance, zero trust implementation, cloud consolidation, post-quantum cryptography readiness and the reduction of waste, fraud and abuse through initiatives such as the Department of Government Efficiency. This technology agenda presents sustained 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 and aerospace, and operations and maintenance activities, as IT capabilities are embedded into varied and widespread programs, often beyond traditional IT areas.

Deltek anticipates the federal IT market experiencing targeted and uneven growth over the forecast period as priority agencies aligned with administration priorities drive demand, while most civilian agencies face budgetary pressures. Across this environment, contractors that understand the policy, technology and acquisition forces shaping agency investment will be best positioned to capture emerging opportunities.

Key Findings

• Targeted, uneven growth. The federal IT market grows modestly through FY 2029, but growth concentrates in agencies aligned to administration priorities (DOD components, DHS, DOJ, DOE) and with supplemental funding from the One Big Beautiful Bill Act. While most civilian agencies face flat-to-declining budgets, spending growth across segments is uneven.
• Acquisition is being fundamentally rewired. The Revolutionary FAR Overhaul, GSA contract consolidation/OneGov, a commercial-first mandate and a new fixed-price default are reshaping how, where and from whom the government buys IT.
• AI moves from pilots to scaled adoption. Agency AI use cases rose 69% year over year and new AI procurement and security policy puts guardrails around adoption. GSA's OneGov and USAi.gov create new low-friction buying paths; and agentic AI is an emerging focus tied to legacy modernization.
• Cybersecurity compliance hardens. CMMC is now in Phase 1, with Phase 2 scheduled for November 2026; post-quantum cryptography migration is advancing; and AI-enabled cyber defense is being written into acquisitions.
• SaaS leads cloud spending. Identifiable federal cloud spending rose from $17B in FY 2024 to $19B in FY 2025. SaaS continues to outpace other cloud models, reinforced by consumption-based buying and FedRAMP 20x automation.
• Oversight and transparency are rising even as the IT Dashboard sunsets. New OMB reporting requirements such as CIO contract approvals and pricing/utilization disclosure, increase scrutiny and price pressure while the sunsetting of the IT Dashboard reduces public program visibility.
• Small business landscape is contracting and shifting. Consolidation, fixed-price risk and socioeconomic program changes pressure small businesses, even as set-aside dollars and emerging-tech opportunities grow.

Critical Insight for Vendors

Deltek's Federal Information Technology Market, 2026-2029 report takes a strategic 4-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 five 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 Information Technology Market, 2026-2029 report is delivered in PowerPoint® format, including a PowerPoint® Executive Briefing, and an Excel® data workbook.