New Report: National Security IT Priorities, Technological Change, and Opportunities

Under pressure from rapid technology change and evolving cyber threats, the federal defense and intelligence IT communities are pursuing capabilities that support key national security objectives. These capabilities include a host of new technologies that act as critical enablers ensuring mission success. Investment in these enablers is also providing opportunities for industry to support the government in the areas of system modernization, cloud computing, cybersecurity, artificial intelligence, data analytics, and automation.

In its recent analysis report on the Federal Defense and Intelligence IT Market, 2022-2024, GovWin’s Federal Market Analysis (FMA) team examines the policy, legislative, and technology factors shaping the procurement and use of IT goods and services by both the Department of Defense and the agencies that make up the Intelligence Community.

Key findings in FMA’s analysis include the following:

Department of Defense (DOD)

• 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 across contractor supply chains, driving up their cost of delivery.
• Small Business Challenges. 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 stresses 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. Revision of the Cybersecurity Maturity Model Certification (CMMC) program is changing 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/Machine Learning (AI/ML) Integration. Military departments are increasingly integrating AI/ML capabilities into warfighter missions, often by 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, the DOD's new Chief Digital and AI Office (CDAO) is tasked with providing remedies for recognized weaknesses in AI governance.

Intelligence Sector (IC)

• Innovation Imperative. Intelligence agencies' overall IT budgets remain strong, but the speed of technological advancement, data growth, and ever-increasing tech-savviness of adversaries makes it imperative that the IC employ innovation while detecting, evaluating, and combating the threat landscape.
• Threat Landscape. As threat landscapes continue to expand in areas such as cyber space, the Internet of Things, space, and even within organizational ranks, the IC’s 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 the use of more commercial products, services, data, and OSINT while also employing bailment agreements, challenge competitions, OTAs, and CRADAs to speed acquisitions.
• 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.

These and other factors continue to influence the DOD/IC’s efforts to develop and deploy the technical capabilities required to support varied mission objectives and IT modernization.

To learn more about the major trends and drivers in the national security IT market and to see recommendations for how solution providers can maximize their market positioning, read the full report: Federal Defense and Intelligence IT Market, 2022-2024.