Federal IT Outsourcing Spending to Reach $15B

New report says legislative obstacles are disappearing as DoD leads way in outsourcing.


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Posted January 9, 2003

Roy Mark

Federal government spending on IT outsourcing services will more than double from 2002's $6.6 billion to nearly $15 billion by 2007, according to a new study by Input, a Chantilly, Va.-based sales and marketing firm for government technology vendors.

The report says a combination of administrative pressures to compete with non-governmental activities and difficulty in retaining and replacing qualified technical personnel is driving a significant increase in spending by federal agencies for IT outsourcing services.

"The legislative obstacles to outsourcing that loomed at the end of 2001 largely disappeared in 2002, and even though the subject remains politically sensitive, INPUT expects that the new Congressional leadership will foster a generally favorable atmosphere for outsourcing vendors in 2003," said Payton Smith, manager of Input's public sector market analysis services.

The report also points to several bellwether initiatives that will influence the development of outsourcing programs in the federal government.

"The Navy/Marine Corps Intranet (NMCI) program at the Department of Defense (DoD) and the IT Managed Services contract at the Transportation Security Administration will both play a significant role in defining future outsourcing projects in the defense and civilian agencies, respectively," Smith said.

According to Smith, the Navy's NMCI implementation in particular is having a significant impact on DoD spending, pushing the growth rate for DoD IT outsourcing to 19 percent over the next five years.

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