U.S. government slows tech spending

The U.S. federal government is putting the brakes on technology spending, according a forecast from analyst firm Datamonitor. After a decade of growth when spending averaged 5% to 10% year to year, Datamonitor projects federal technology spending will slow to an annual compound growth rate of 4% over the next five years.

While this isn’t good for vendors or contractors, the impact won’t be immediately noticeable. The market for fiscal year 2004, which ends in September, is still more than $46 billion – no small chunk of change. Datamonitor believes the slowdown heralds greater accountability of how public funds are spent and marks a shift in the way government views IT purchases.

Datamonitor expects a few areas of technology in which spending will grow faster than the federal tech market overall: citizen/CRM, ERP and security. Collectively, Datamonitor expects these categories to account for nearly $7 billion of U.S. federal technology investments in 2009.

And while spending will slow in general, vendors will still be able to grab a bigger chunk of the pie. Datamonitor notes that the portion of total IT budgets that is available for vendors to bid on continues to increase. The software and services areas pose the most opportunities, while hardware and communications show slower growth.

Go to Datamonitor at www.datamonitor.com for more information about the report, titled “Finding Opportunities in a Tightening U.S. Federal Market: Five-year Outlook for Vendors.”