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2/12/2009
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Stimulus Deal A Bonanza For Tech Industry

The plan allocates billions of dollars for spending on IT and IT-related projects.

The federal government's economic stimulus plan appears to be one of the most tech-heavy pieces of legislation passed by the federal government and it represents billions of dollars worth of opportunity for IT and the tech industry in general.

The package, at $789 billion, contains provisions and allowances for IT and tech spending through government agency's modernization plans, grants and tax incentives, and through specific tech initiatives. While health care clearly represents the largest piece of the pie, the legislation contains countless opportunities for tech vendors through a vast array of programs and proposals.

Input, a marketing intelligence and consulting firm for the IT software and services sector, estimates that the package contains about $52.4 billion allowable IT investments as part of state and local grant funding streams, and two-thirds of the IT-eligible economic stimulus funding will be spent between 3Q 2009 and 4Q 2010.

The estimates are based on the latest figures released before a congressional deal on the package was announced Wednesday.

The General Services Administration (GSA) and the Department of Health and Human Services (HHS) are each likely to spend an estimated $1 billion on modernizing their infrastructure. Customs and Border Protection will get around $100 million for nonintrusive inspections for port security, and the TSA is expected to spend around $700 million on systems for baggage screening, rapid explosives detection, and advanced X-ray systems for carry-on items.

Several other agencies are slated to get funds to modernize their IT infrastructure with improved desktops, applications, and networks, as well. In addition to GSA and HHS, they will include the Department of Defense, which will likely receive $3 billion; the Social Security Administration, which is on track to receive about $500 million; and the State Department, which is likely to get $100 million for modernizing IT systems.

Vendors that stand to benefit from the bonanza include U.S.-based outsourcers IBM, CSC, EDS, and ACS.

"It looks like there will be a lot of transparency as far as how lot of funds are spent, but I think the agencies will have some discretion as to how to best utilize the funds," said Michael Biddick, CTO of Windward IT Solutions, a consulting and management firm that focuses on government use of networks and infrastructure.

Broad initiatives for things like green infrastructure and smart energy grids are likely to impact IT, but the details on the administration of those programs are too vague to tease out actual figures, Biddick said.

It's also unclear how about $6.5 billion in funds for broadband expansion will be spent. That will depend on a new definition of network neutrality from the Federal Communications Commission, as well as whether grants will be channeled to local governments, ISPs or consumers. Also, it's unclear whether tax cuts will be included in the package when it's approved by President Barack Obama. Insiders said Wednesday that the tax cut had been eliminated but there was still a little time left to restore it.

Robert Atkinson, president of the Information Technology and Innovation Foundation, said he would watch closely to see whether the neutral network management requirements are likely to discourage ISPs from applying for broadband expansion grants. It's also crucial that some initiatives like broadband expansion move quickly, he said.

Chris Dixon, manager of State and Local Industry Analysis for INPUT, said that, on state and local levels, education and transportation will also receive big "buckets of money." However, IT will have to compete with other projects for those funds. The American Recovery and Reinvestment Act provides backstops to increase IT spending in state and local governments, which probably otherwise had to curtail IT spending, he said.

"It's probably the most expansive and tech-aware piece of legislation the federal government has ever passed," Dixon said.

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