Magazine article National Defense

Pentagon Info Tech Spending to Peak at $11 Billion in '99

Magazine article National Defense

Pentagon Info Tech Spending to Peak at $11 Billion in '99

Article excerpt

The Defense Department's information technology budget is expected to top out at $11.2 billion in Fiscal Year 1999, forecasts the Government Electronics and Information Technology Association (GEIA).

Industry analysts predict following the high water mark, the Pentagon will make slight cuts in the proceeding five-year period. By Fiscal Year 2003 the information technology budget will be $10.9 billion.

The good news for industry is more of those funds will go to contractors through outsourcing, according to Gerald Harvey, chair of the five-year forecast by GEIA He says private sector contracts may total 81 percent of information technology obligations by 2003. That is a 3 percent increase in five years.

The way contracts are awarded is expected to change dramatically as industry and government officials push for new advancements in procurement reform that will reward contractors for performance and low prices.

Federal spending on information technology will be relatively fiat for the forseeable future, the GEIA report predicts. Yet the dynamics are changing rapidly as the majority of the information technology budget is allocated for services instead of hardware and software. In Fiscal Year 1999, only 23 percent, or $2.6 billion, is tagged for hardware and software. The rest is for services.

"Service is the only area of real growth across the agencies," says Harvey. Civil agencies pocket the larger portion of any increases. Defense agencies can expect their share to shrink Information technology will account for only 35 percent of total expenditures for information technology services by 2003, an 8 percent decline in 10 years.

Decreasing funds and increasing demands for services will require change in business practices. Executives should bid farewell to double digit profit margins and stop relying on requests for proposal, said Michael Kush, chair of the defense portion of the forecast.

"If you have a profit margin of 13 percent, information technology will recede to 7 percent," says the study. Wall Street analysts expect such action as a government backlash against increasing levels of profitability begins.

As the market shrinks, the GEIA analysis reveals changes in contracting, too. 'f you are waiting for a phone call to let you know that the request for proposal is on the street, you are missing $2 billion to $4 billion in appropriations," says Kush

To carve out a section of the scarce dollars, information technology businesses must be proactive. Kush added, "Go to the Defense Department with your solutions to their problems. Don't wait for them to tell you what they need."

The number one priority of the Defense Department is Year 2000 work. Contractors see this as an opportunity to discontinue legacy systems, but could find themselves in competition with the Air Force for remediation work, said the market forecast.

A worst case scenario for industry would be the call to stop work on all software projects, except those related to the Year 2000 (Y2K) bug. In August, Defense Secretary William S. Cohen threatened to pull the plug on all software work except Y2K related projects, if the Pentagon continued "lagging behind."

Industry is taking the message seriously. Kush said the stoppage is a `ery real possibility, ... so that all efforts can be concentrated on the [remediation] effort."

The possible malfunction of thousands of systems has caused military leaders to take on another priority the protection of information systems from intrusion. information technology could be the deciding factor in many outsourcing decisions, the forecast reveals.

Information assurance is a priority in establishing a network-centric environment, the report relays. Kush says commanders are concerned about reliability. These commanders often ask, "Is the information I am receiving from the person [indicated on the message], and is information technology what he intended to send me? …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.