One of the conventional views of political pundits after the Nov. 6 Presidential election was that both parties spent billions of dollars on the campaign for a result that did not change the political landscape all that much. Below the broad trends that keep political pundits in business, however, are the myriad federal issues that have a more direct impact on business.
In the information technology sector, industry specialists see more than just a status-quo situation resulting from the election. The first obvious factor is the continuity element. New administrations usually take six months or so to settle in, and a victory by contender Mitt Romney could have put the current program to improve IT performance at the federal level on hold. However, with the Obama Administration now succeeding itself, initiatives taken in the first term will carry over without interruption into the second. That means the IT reform plans should move to the next level rather than being temporarily suspended by a new regime.
“Continuity should favor continued reform for IT. Any residual wait-and-see postures at the agencies won’t fly very well as the administration pushes forward on improving IT performance,” Steve O’Keeffe, founder of MeriTalk, told the E-Commerce Times.
Emphasis on IT Execution
“In general, not much will change in terms of direction,” Deniece Peterson, director for federal industry analysis at Deltek, told the E-Commerce Times.
The emphasis will shift from the from the planning and strategy phase to execution of the IT initiatives launched over the past couple of years. “There will likely be more intensity in terms of proving their effectiveness, but that will likely be counterbalanced by lack of funding to do the heavy lifting that would have the greatest return,” she said.
The outlook for federal IT over the next several years embraces several elements:
- Scope of reform: “Agencies will continue to focus on mission-critical requirements and solutions that enable a more agile government. Priorities include cybersecurity, cloud computing, data center consolidation, infrastructure modernization, big data and mobility. There will more pressure to show mission results or financial return on investment, as agencies transition from policy and planning to execution,” Peterson said.
A major contribution of the administration’s reform plan was that it broke down IT into various components and then set an agenda for each, making the reform process reasonably digestible. Moving with the same intensity on each priority in the next year or so is unlikely. Data center consolidation should be an area of continued high priority for reform. “Data management just soaks up so much of federal IT spending that it has to be a major goal,” O’Keeffe said.
Cloud computing will remain a hot topic for federal IT investment. “In addition to budget pressure, in a technology-oriented administration, there is pressure to be innovative and agile. Cloud computing offers interesting opportunities in those respects,” Monica Desai, a partner and technology counselor at Patton Boggs, told the E-Commerce Times.
Whether or not cybersecurity is considered a traditional IT function for budgetary purposes, it is clear that Internet protection will require increased resources at the federal level. Mobile IT and bring your own device have just begun to command attention as separate but growing components of the federal IT landscape.
- Budgets: Both political parties agree that the federal government needs fiscal discipline. Some government functions may get budget increases, but many others will be cut, and not just for one year. In a recent analysis, TechAmerica projected that federal IT spending would remain essentially flat, from US$73.5 billion in 2012 to $77.7 billion in 2018. However, those levels are significantly below TechAmerica’s 2011 forecast. While Deltek uses a broader base for calculation, it predicts an actual decline in IT spending, from $121 billion in 2012 to $113 billion in 2017.
One sign that the Obama Administration won’t let up in its drive for economy in IT deployment was a recent blog posting from Jeffrey Zients, deputy director of the Office of Management and Budget. The Administration of late is putting emphasis on commodity IT — generally available, common, or non-specific offerings. In a recent initiative, federal agencies collected and analyzed baseline data on 13 specific types of commodity IT investments, spanning infrastructure, business systems, and enterprise IT. The agencies projected a decline of commodity IT spending from $13.75 billion in 2012 to $13 billion in 2015, and a cumulative savings of $2.5 billion below what would have been spent without the analysis.
“What came out of this thorough process were thoughtful and ambitious plans to root out IT waste,” Zients said. One example: the Department of Homeland Security reported it would save $376 million over the next three years on IT infrastructure, including mainframe and server products, by leveraging the bulk buying power of the entire department.
“In terms of budget pressure, everything is on the table for cuts, but it forces agencies to invest in better solutions and I think there is a buy-in to IT as an enabler. Agencies will be forced to make hard decisions about investments, so an acquistion becomes a must-have decision versus a nice-to-have option,” Peterson said.
“There will be continuing pressure for agencies to demonstrate that the use of IT is effective in reducing the cost of operating the government,” O’Keeffe said.
- Contracting: “Consistency in leadership adds some level of certainty to the federal contracting market, so the instability that typically occurs with an administration change is at least one thing contractors can remove from their worry lists,” Peterson said. Other elements that may affect contracting include the Administration’s tilt towards shared services, strategic sourcing, and a modular approach to contracting and project development. “We will also see continued contract consolidation and streamlining as the administration attempts to reduce overlap in contracts.”
Vendors can look for more attention to federal IT contracting approaches, according to Mike Hettinger, vice president for the public sector innovation group at the Software & Information Industry Association. “We also expect to see a continued focus on performance and mission-oriented goals and increased attention paid to the need to reform federal IT procurement,” he said.
Budget Clock Ticking
Somewhat less predictable is the most immediate issue of resolving the impasse between the administration and Congress over long-term budget and tax issues. Failure to reach agreement by the end of 2012 could trigger radical cuts to spending referred to euphemistically by politicians as “sequestration.”
“It was clear throughout the election that there was a commitment from both campaigns to address some of the most pressing issues critical to the growth of our industry — access to human capital, opening new markets, protecting intellectual property and modernizing the U.S. tax code,” said Shawn Osborne, president and CEO of TechAmerica.
“We look forward to working with the president and the new Congress to ensure our leaders put their money where their mouth is to make progress on these critical issues. With the declared desire by the president and members of both houses of Congress to ensure sequestration is not implemented, we expect quick action so our industry can go forward with certainty,” he said.