FY13 DoD IT Spending Outlook

by Tim Larkins, Senior Manager, Market Intelligence

As I mentioned in my previous post, the threat of sequestration is definitely having an effect on federal IT spending; but it doesn’t mean you can’t grow your federal business in FY13.  But in order to succeed in this environment, its important understand DoD’s key spending drivers such as increasing tactical communication, interoperability, and infrastructure consolidation. For example, DoD plans to reduce data centers from 770 to fewer than 100, and network operations centers from 65 to 25. The Joint Information Environment (JIE) initiative being promoted throughout DoD is expected to improve interoperability, share secure information, and lower costs across the department.

It is true that most service branches are seeing at least nominal reductions in the IT budget requests. The Army’s FY 2013 IT budget request shrunk one percent over last year (still, it remains the largest IT budget of all federal agencies). One notable exception to this overall decrease is the Defense Information Systems Agency (DISA), which is seeing its IT budget rise by approximately two percent up to $5.13 billion. This is partly due to redistribution of funds from the military service branches to DISA as the DoD shifts increasingly toward enterprise and hosted services.

As reduced spending continues to be the norm across both defense and civilian agencies, they will now have to take a hard look at unobligated dollars for potential cuts. Funding for new initiatives may be stalled or fail to get off the ground entirely; and most existing programs will struggle to maintain current funding levels.  Product vendors and solution providers have to consider how their products serve existing programs – and, if possible, whether there’s a cloud-based approach to their offerings.

Keep in mind, DoD’s FY13 IT budget request alone is about $37 billion.  Even though it is smaller than last year’s, it’s still a big chunk of money, and the bottom line is that vendors who can help their government customers do more with less will be well poised in FY13.