10% IT Cuts Mean More Opportunity, Not Less

by Chris Wiedemann, Senior Analyst

Despite constant uncertainty and doubt around the federal budget in recent years, there has always been one prediction that the technology community could make with confidence: federal IT budgets remain consistent. In fact, over the last five years, and in the face of ever increasing mission requirements, agency CIOs have been working with mostly flat budgets. While not ideal – ask any customer how much they enjoy being told to “do more with less” – budgetary landscapes were at least easy to predict, and purchasing decisions could be made with a fair degree of certainty about overall appropriations.

That relatively stable environment appears to finally be changing, and (at least on the surface) changing for the worse. Barring the passage of eleventh-hour legislation, sequestration will see all federal agencies subjected to across-the-board budget cuts, and IT will certainly feel the squeeze. On top of that, federal CIO Steve Van Roekel recently pushed out a memo stating that all federal agencies would be required to report a 10% reduction in their top line IT budgets by FY14. With the dual pressure of sequestration and a further mandated IT budget reduction, not to mention the difficulties of meeting constantly expanding requirements with already stretched budgets, many members of government and industry have been left thinking the worst.

Fortunately, the situation is not as dire as it appears. Recent OMB guidance goes into more detail about that 10% IT budget reduction, and the message it brings should be heartening to IT product vendors: the primary targets for IT spending cuts will be duplicative commodity investments and underperforming projects. Moreover, agencies will have the authority to reinvest money saved into consolidation efforts and high-priority programs. In fact, they will be required to reinvest at least half of the money they cut, with priority given to areas such as consolidation of commodity IT, cybersecurity improvements, data analytics, and cloud computing. In other words, that 10% figure isn’t going to disappear; instead, it will represent big opportunities for the IT product community to demonstrate superior ROI to government customers.

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