Government IT Outsourcing Expected To Soar

A Bush administration mantra has been to outsource when practical, so it shouldn't come as a surprise that federal government spending in IT outsourcing services is projected to grow at double-digit rates in the foreseeable future.

Input, a government IT market-research firm, sees federal government spending on IT outsourcing, which stood at $6.6 billion in fiscal 2002, soaring to $15 billion in fiscal 2007. That's a whopping 18% annual growth rate.

"A combination of administrative pressures to complete nongovernmental activities and difficulty retaining and replacing qualified technical and program-management personnel is driving a significant increase in spending by federal agencies for IT outsourcing services," says Payton Smith, Input's manager of public sector market-analysis services. "The legislative obstacles to outsourcing that loomed at the end of 2001 largely disappeared in 2002, and even though the subject remains politically sensitive, the new Congressional leadership will foster a generally favorable atmosphere for outsourcing vendors in 2003."

Smith cites the Navy and Marine Corps intranet program and the IT managed-services contract at the Transportation Security Administration as examples of major governmental outsourcing projects that will influence other agencies to outsource IT services.