Moderate Growth, Then Boom Expected For Government IT Spending

Anticipating a wave of IT staff retirements in about three years, government analysts believe outsourcing will drive profound spending increases through 2010.
A minor time bomb is ticking away in state and local governmental IT operations in the form of a wave of IT staff retirements that are expected to take place in about three years, according to a reported released Wednesday.

Government market research firm INPUT said spending in state and local IT operations is expected to grow from $48 billion in fiscal year 2005 to $70 billion in fiscal year 2010. INPUT expects IT investments in the segment to experience moderate growth in 2005 with some acceleration to occur in the following year.

"Beginning in 2007, the need for outsourced technical services, primarily caused by increased employee retirements, will drive profound increased spending through 2010," the INPUT report stated.

Professional services should pace the demand side, followed by telecommunications/networks expertise, the market research firm said, noting that a more intense demand of 15 percent growth is expected to kick in during 2008 as retirements grow. INPUT said advanced interoperable telecommunications will be needed to coordinate law enforcement, border security, and homeland security.

"Vendors need to sit tight for the next couple of years as the market grows at a respectable, but still moderate, rate while agencies work in a risk-averse mode," said James Krouse, INPUT manager of state & local market analysis, in a statement. "In about 3 years, we will see that trend end as state and local agencies are forced to find outside expertise to replace a retiring workforce. The only choice many of these agencies have will be to outsource non-competencies such as information technology services, which will open vast opportunities to IT contractors."