What you need to know about the president’s budget…for now

By Chris Wiedemann, consultant

After a tumultuous opening to his administration, President Trump delivered his first budget request late last week, which seeks to deliver on long-running Republican promises to increase military spending while cutting non-defense agencies and programs significantly.

While the presidential budget request is not a binding document, meaning it still has to pass through Congress before it can be signed into law, the request is still useful for the priorities it outlines – in many ways, it’s the first attempt to put campaign promises and rhetoric into hard policy and guidelines for the executive branch.

It’s also the best tool that we in industry have to begin FY18 planning, meaning we ignore it at our peril. With that in mind, here are some of the key early indicators in the FY18 budget request:

  • Defense spending is up; non-defense is significantly down. This was a widely-expected result of the administration’s budget request, and the rebalancing of spend towards defense is likely to happen in some form, even if this budget doesn’t survive Congress. If you sell to the Department of Defense, prepare for your customers to receive a funding boost, most of which will be targeted towards increasing readiness. On the non-defense side, many agencies may be in for another round of belt-tightening.
  • Border security, law enforcement and veteran health will be priorities. In another move that mirrors campaign rhetoric, the FY18 budget request increases funding for parts of the Department of Homeland Security, the Department of Justice and Veterans Affairs. This could mean more opportunity at all three of those agencies, particularly if we assume that increasing border protection will have a technological component as well as a physical one. IT companies will also want to look to the VA after Secretary David Shulkin indicated that an EHR built by the private sector may be on the horizon.
  • The technology implications of the budget are still unclear. While there is some limited guidance around specific IT programs, many of the most high-profile cuts come from spending areas that don’t include much native IT – foreign aid, grants to states for various social welfare programs, etc. However, one thing the administration has been clear on is a preference for reducing the federal workforce through attrition, which suggests a return to outsourcing agency work across all mission areas, including IT. If that happens, look to systems integrators and large prime contractors to assume a greater role in IT purchasing decisions.

These observations are preliminary and this budget request is still new and relatively light on detail, making it difficult to draw concrete conclusions. immixGroup’s Market Intelligence team will stay on top of the latest developments as they pertain to IT vendors.

If you have any more questions, please contact your immixGroup account team for an introduction to the Market Intelligence team.

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