What to Expect for IT Spending in FY13

by Tim Larkins, Senior Manager, Market Intelligence

In the wake of immixGroup’s FY13 DOD and Civilian Budget Briefings I’ve had a moment to reflect on the information our team delivered, and what the take home messages should be for the IT product community.  As we said last year, cost savings and operational efficiencies will continue to drive IT procurement across the government in the foreseeable future.  And solutions that will assist the government in this endeavor include those related to cloud and mobile technologies, cybersecurity, big data, and infrastructure consolidation.  Given the impending budget cuts due to the CR and sequestration, a huge question mark looms over the industry – how much money will the government actually spend on IT in FY13?  Well let’s begin by looking at the IT budget request.  The President’s FY13 IT budget request was pretty consistent with prior year levels, at $78.9 billion.  Typically over the past several years, we have seen reported IT spending government wide come in at the levels requested – $80 billion or so.  In reality, total IT spend across the government (including embedded systems) reaches up to about twice the request.  But we can expect considerably less than $160 billion in total IT spending across the government this year (and for the next 9 years for that matter).

When taking the CR and sequestration into account, we’re looking at a total discretionary spend across the government of about $950 to $960 billion (which represents a 26% decrease in discretionary spending since 2011).  The IT specific portion will most likely be cut to about $73 to $74 billion.  Given IT spending out of RDT&E budgets, C4ISR projects, intelligence agencies, and embedded systems, I would estimate about $140 to $150 billion in total IT spending this year.  Some may groan that this is a $30 to $40 billion cut from prior years… but I don’t think that $150 billion is something to shake a stick at.  The key to winning a chunk of this business will be for vendors to show their significant value and provide the lowest cost.  Remember to communicate the key differentiators of your products clearly, as program and contract managers will not have the time (or the patience) in the coming year to make inferences or read between the lines of proposals.  Their focus will be on how to realign programs to fit within new budget constraints, and how to spend money appropriately in a tumultuous environment – so by making their lives easier, you’ll be doing yourself a favor as well.