Demystifying Exhibit 53: 5 Things Every COTS Vendor Should Know

by Chris Wiedemann, Senior Analyst

The FY16 budget request is in and it brought a valuable piece of information for COTS vendors, the Exhibit 53.

In case you didn’t know, the Exhibit 53 is the single source for next year’s IT budget across government, broken down at the program level. Programs are where the rubber hits the road in federal IT, so knowing which programs your customers are focusing on for the rest of FY15 and into FY16 is not just a good idea, it’s critical to your success as a COTS salesperson in the federal market.

Obviously, the FY16 numbers in this document aren’t set in stone. They’re based on requested values, so there’s no guarantee agency IT budgets will reflect these numbers. However, knowing what your customers are prioritizing is still useful information and there are 5 major takeaways I’d like to share with you from this year’s Exhibit 53:

1. THE FY15 APPROPRIATIONS ARE UP!  
   Well, not exactly, although we now know exactly how much money each agency and program received for FY15, which can reveal new targeted sales opportunities or weed out old ones. A quick glance shows us that DHS, VA, DOJ, and DOC are all up over $100 million from their FY15 requests, while HHS is up a whopping $3.9 billion (more on that later).

2. SOME AGENCIES ARE LOOKING AT MAJOR INCREASES FOR FY16
   DHS, Treasury, VA, DOT, State, and Labor could each potentially see $150M+ increases to their IT top lines next year.

3. HHS FUNDING IS JUST AS MISLEADING AS EVER
   Although the numbers look crazy, almost $4 billion up from their FY15 request this year and asking for $1.2 billion less next year, the truth is most of HHS’s IT budget is made of grants, and one grant in particular (funding state-level Medicaid systems) drives most of the fluctuation here. In other words, it isn’t addressable funding to federal COTS vendors anyway. Your total addressable market will be roughly the same.

4. MISSION PERFORMANCE IS THE NEW COST REDUCTION
   OMB is really driving agencies to demonstrate that their investments are resulting in performance gains. This explains some of the increasing budgets in departments that have shown flexibility and innovation recently and it’s great news for the COTS community. Phrases like “best–in-breed” and “cutting-edge” should be front and center in your marketing messaging to your government customers.

5. NO NEWS ON THE DOD FRONT
   You’ve probably noticed there’s been no mention of DOD yet in this blog post. That’s because they are rarely included in the first release of Exhibit 53, so unfortunately, DOD salespeople are going to have to wait a few more weeks for FY16 data to be released.

Be sure to grab a copy of the latest Exhibit 53 for yourself here, and remember, it’s never too early to start planning for FY16, building strategic relationships with your customers, and leveraging immixGroup’s Market Intelligence team to drive sales success.