Cloud computing, security to drive U.S. gov't IT spending

It could grow to $90B in five years, Input says

U.S. government IT spending is projected to grow to $90 billion in 2014, up from $76 billion in 2009, with cloud computing and cybersecurity being high-growth areas, according to Input, an analysis and consulting firm focused on government contracting.

Input projected that the federal government's cloud-computing market will grow by 27% over the next five years, with spending of more than $1 billion in 2014. Cybersecurity spending is expected to grow at a compounded annual growth rate of more than 8%, from $8.2 billion this year to $12.2 billion in 2014, Input said.

President Barack Obama's administration has "aggressively" promoted cloud computing to federal agencies, said Deniece Peterson, manager of industry analysis at Input. The Obama administration is pushing cloud computing, health IT and smart-grid spending now in hopes of saving IT money in later years, she said.

"We've kind of dubbed this the spend-to-save administration," Peterson added. "The end goal is to spend this money in order to save money."

The growth in cloud computing is a big area to watch, she said. Instead of trailing the commercial sector, government use of cloud computing will grow about the same rate as in the private sector, Peterson said.

Hosted applications, such as e-mail, Web conferencing and payroll, are areas where the federal, state and local governments appear to be particularly interested in cloud computing, Peterson added.

In cybersecurity, there's a growing push from lawmakers and the Obama administration to secure government networks, Peterson said. The trend to spend more on cybersecurity has been happening for several years, she said.

"The rapid change in the nature and volume of threats" has driven more spending, she added. "As we see more threats and congressional scrutiny and public scrutiny ... come to a head, that's why we're seeing that market grow a lot faster than the overall IT market."

Still, less than 10% of all U.S. government IT money goes toward security, Input said.

Last year, Input projected a compound annual growth rate of 4.1% in government IT spending over five years, and this year the five-year growth rate is down to 3.3% a year. While Input has adjusted the numbers downward, there are still some "really promising" opportunities for contractors, given the bad economy, Peterson said.

Contractors should, however, be ready for acquisition reform efforts in the U.S. government, she added. The Obama administration, members of Congress and the U.S. Department of Defense are all pushing for more transparency and accountability in contracts, and contractors should expect more reporting requirements and oversight, she said.

New requirements could make for a "major cost imposition" for small government contractors, she said.

Copyright © 2009 IDG Communications, Inc.

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