Magazine article National Defense

Defense Department to Wring Savings from Its Info-Tech Buys

Magazine article National Defense

Defense Department to Wring Savings from Its Info-Tech Buys

Article excerpt

Although the Defense Department continues to pour funding into information technology initiatives, contractors may find the pool of money shrinking over the next five years.

Defense agencies will only spend $58.6 billion in 2017 on IT products and services from industry, down from $68.4 billion in 2012, according to a report by Deltek, a Herndon, Va.-based enterprise software company.

As the Defense Department tries to balance its growing information technology needs with a budget that is decreasing overall, it will concentrate funding on consolidation, cybersecurity and programs that increase interoperability and efficiency, analysts said.

The budget-conscious atmosphere means companies will have to offer solutions that meet the requirements at the lowest possible cost, said Tim Larkins, a defense market intelligence consultant for immixGroup.

"What they're trying to get here is functional, affordable technology," Larkins said. "if you are not the lowest price, then you have to justify why the government should be purchasing your product or service."

Overall, IT contracts will become smaller because long-term contracts tend to go over budget and become hard to manage, said John Slye, an advisory research analyst at Deltek.

"That increases your competition costs for contractors because you have to submit multiple bids or respond to multiple task orders," he said.

The Pentagon in 2011 laid out a strategy calling for greater consolidation because the complexity of the IT environment "reduces our ability to secure our information systems, hampers our ability to share information, and needlessly consumes the finite resources available to DoD," it said. The hope is that short-term spending in this area will help spur long-term savings.

According to the chief information officer's 10-point plan for IT modernization, the department plans to reduce the number of data centers from 770 to fewer than 100, consolidate network operations centers from 65 to 25 and move the services to a joint enterprise architecture.

This provides contractors with an opportunity to help coordinate, consolidate and migrate the networks, said Slye. Network consolidation is "complex, so it takes time to do it. So there are opportunities for that kind of traditional systems integration and software migration support."

One such program is the Navy's Consolidated Afloat Networks and Enterprise Services (CANES), which will streamline five shipboard networks into one and equip 190 ships and submarines and two maritime operations centers with hardware and software.

Northrop Grumman received a $637 million contract in 2012 to design and implement the system.

Such standardization will result in a lower operating cost, Rear Adm. Jerry Burroughs, the Navy's program executive officer for command, control, communications, computers and intelligence, has said.

However, CANES will be a costly undertaking--Burroughs estimated the total cost will he significantly more than $1.5 billion for development, procurement, installation, testing and sustainment of the system.

The Defense Department has already made progress on data center consolidation initiatives. Since 2010, it has closed 380 of its 770 data centers, and it will eliminate another 315 in 2013, Larkins said.

In coming years, the Pentagon will also seek to consolidate its licenses, said Slye. For example, the Defense Department and Microsoft reached an enterprise licensing agreement in January that will provide lower-cost software for the Army, Air Force and Defense Information Systems Agency.

"That's another area of cost savings and efficiencies that they're trying to achieve. And they won't stop at Microsoft, it will be other applications and other software," he said.

Although the Defense Department will likely spend less money on services from contractors, it may increase spending on cybersecurity. …

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