Civilian agency spending on IT is expected to rise by 10 percent before the end of fiscal year 2015, with an increase of $4.5 billion over original budget projections, according to a new report from IDC Government Insights.
IDC analysts put the new 2015 IT spend at $48.1 billion, set to increase by 1.9 percent to $49 billion under the president’s proposed 2016 budget.
Report: A Spike in Spending – U.S. Federal IT Forecast
Health and Human Services has the largest IT budget at just under $11.4 billion for fiscal 2016, and contributed the most to the 2015 adjustment.
Spending at HHS, originally projected at $8.6 billion this fiscal year, is now pegged at $12.6 billion, an increase of 45 percent.
The Medicaid Management Information System grew by more than 50 percent from 2014 to 2015, from $4.2 billion to $6.8 billion, and is the “chief cause of total civilian IT spending being overbudget,” the report states.
The program budget is expected to drop back to $5.7 billion in fiscal 2016, according to the report.
“At 28.1 percent, the Department of Health and Human Services was the clear growth leader for 2015,” said Shawn McCarthy, IDC Government Insights research director. “Despite the fact that the agency will see slightly negative growth for 2016, HHS still dwarfs other agencies when it comes to IT spending, representing over 23 percent of civilian agency spending.”
Spending shifts from DoD to civilian
The data also shows a significant shift in the overall IT spending landscape, with civilian agencies far outspending their defense counterparts.
Civilian agencies will account for 41.3 percent of government IT spending in 2016, far outclassing DoD (25.9 percent), state (14.5 percent) and local (18.3 percent), according to the report.
“Five years ago that wasn’t the case,” the report states. “At that time, DoD was the largest slice of the pie at over 40 percent, but decreases to DoD IT investments plus an increase in civilian agency investments has changed the scope of government IT spending.”
While civilian agencies are spending more on IT, only half of civilian IT budgets ($25 billion) include “addressable” spending, i.e. actual IT products and services. The remainder is dedicated to IT personnel salaries, non-VOIP telecoms and office equipment.
On the vendor side, the data also shows a shift toward system integrators, noting several of the top 10 contractors fit this description.
“The government has shown a preference for purchasing systems as opposed to separate hardware and software solutions it needs to implement itself,” the report reads.
“Under the Obama administration, more budget money has been channeled to civilian IT departments,” IDC concluded. “The proposed FY16 budget shows that this growth should continue,” barring a national emergency or other impetus that would redirect funds.
If the current trends continue, IDC projects civilian IT spends will reach $57 billion by fiscal 2019.
