The Business Opportunity in Customer Experience

Ever since the passage of the 21st Century Integrated Digital Experience (IDEA) Act, and the promulgation in December 2021 of Executive Order 14058 on “Transforming Federal Customer Experience (CX) and Service Delivery to Rebuild Trust in Government,” improving the experience of customers (i.e., the American public) using federal government services has been a driving force in agency investments. To briefly recap what the IDEA Act and E.O. require as goals, agencies are directed to modernize their websites, digitize services and forms, accelerate the use of e-signature capabilities, improve customer experience overall, and standardize and transition common services to government-wide shared services when possible.

Accomplishing these goals is taking different forms at different agencies. The important thing for industry to know is that the legislation and subsequent policy are directing funding to efforts modernizing most public-facing systems. Today’s post provides some details concerning agency spending on CX efforts and the types of businesses that are benefitting.

Total Spending on CX

The chart below shows CX spending at ten civilian agencies. Most CX-related work is being performed across the civilian sector because it is those agencies that provide most of the direct services to American citizens, including health care for veterans, social security payments, and food assistance.

According to the reported data, total CX-related spending came to $147M in FY 2023. This is after a total of $90.2M spent in FY 2022. In other words, after a year identifying systems to upgrade and replace, agencies began implementing their CX strategies in earnest in FY 2023, resulting in total spending growth of 63%. As the chart above shows, however, the vast majority of this spending is taking place at the Department of Veterans Affairs. Therefore, if your company is seeking CX-related work look primarily at the VA.

CX Spending Shifts to IT

Parsing the data by primary requirement reveals that information technology work is the most commonly contracted, with spending on related professional services following behind that.

What the chart does not show is how dramatically spending shifted by requirement from FY 2022 to FY 2023. IT-related CX work accounted for $61M in FY 2022, while spending on Professional Services totaled $30M. In FY 2023, spending on Professional Services fell to $28M, but spending on IT services rose to $119M. This change can be explained by the fact that in FY 2022 agencies used contractor services to help them identify systems in need of modernization. In FY 2022, they then began working on those systems.

CX Spending Benefits Small Businesses

The final data point to show here is spending on CX-related work by business size. As the chart below reveals, the vast majority of spending has gone toward contracts held by small businesses.

The trend is evidence that from the get-go agencies spent $71M on CX-related contracts awarded to small businesses in FY 2022. That number grew to $137M in FY 2023. When it comes to the type of set-asides being awarded by socioeconomic class, it is clear that Service Disabled Veteran Owned Small Businesses ($149M total), followed by Small Businesses ($30M) benefitted the most.

Summing up, work transforming the customer experience at federal agencies has been a real boon for small businesses, especially those owned by service-disabled veterans. Those businesses doing IT work have also benefitted disproportionately vs. those offering professional services. Lastly, CX-related work is being done primarily at the VA, although certain other agencies, such as Agriculture, have also been increasing spending over the last two years.