New Deltek Study Reveals Growth Opportunities in a Declining Federal IT Market
August 07 2012 - 7:30AM
Business Wire
Deltek, Inc. (Nasdaq: PROJ), the leading global provider of
enterprise software and information solutions for government
contractors and professional services firms, conducted a research
study that identifies growth opportunities in the midst of a
declining Federal IT market. According to the GovWin IQ study, with
the recent and projected federal budget cuts, spending on
information technology (IT) products and services by federal
agencies is projected to experience a slight decline over the next
five years and significant disruption that will create both
opportunities and challenges for federal IT providers.
Deltek’s new report, Federal Information Technology Market,
2012-2017, projects federal IT spending will decrease from $121
billion in 2012 to $113 billion by 2017 at a -1.4 percent Compound
Annual Growth Rate (CAGR).
Budget pressures and IT mandates by the Obama administration are
forcing agencies to drive cost savings and consolidation in their
IT infrastructures. As a result, Deltek projects most agencies will
have reduced IT budgets over the next five years.
However, budget and policy reforms, established as the first
steps in forcing agency IT transformation, are driving investments
in key areas of IT that represent growth opportunities for
government contractors. Some of the most prominent investment areas
are focused around cost-saving initiatives. These include analytics
to ferret out waste, fraud and abuse in government programs, the
adoption of cloud computing and the consolidation of redundant data
centers and systems.
In addition, the expanding role of the federal government in
areas such as health care, foreign affairs and cybersecurity is
driving investment in the underpinning resources and systems that
support these initiatives. “While the overall market is declining,
we see some pockets of opportunity that companies can tap into to
soften the impact on their business,” says Deniece Peterson,
Director of Deltek’s GovWin IQ Federal Industry Analysis
program.
At the same time, as budget scrutiny intensifies, companies and
agencies are also facing increased transparency requirements and
increasingly complex contracting rules. “The cost of doing business
with the federal government in many areas is going up,” says
Peterson. “The additional transparency requirements and contracting
rules are increasing costs at the same time agency budgets are
declining. This combination of events is going to put pressure on
company profit margins.”
The study also predicts IT equipment and professional services
will experience contraction (-7 percent CAGR and -1 percent CAGR
respectively) due to reduced federal employment, adoption of
strategic sourcing, a transition to lower cost mobile and thin
client devices. “Data center consolidation and the administration’s
new Digital Strategy are forcing agencies to inventory their
existing infrastructure,” says Alex Rossino, Principal Research
Analyst at Deltek. “This will undoubtedly uncover redundant and
unused assets and impact demand for hardware and software.”
The study concludes that for IT providers to succeed, they must
re-evaluate business strategies and operational processes – from
their approach to mergers and acquisitions to capture strategies
and program management – to enable profitable growth.
“If companies don’t adapt, they are going to find themselves in
the wrong place at precisely the wrong time,” says Peterson.
“Companies need to think about how they strategically position for
the growth segments that remain and adapt their cost structure to
be more efficient and productive.”
Click here to access a free summary of the report, Federal
Information Technology Market, 2012-2017. The report includes
analysis of critical market drivers and inhibitors, and five-year
forecasts for IT Hardware, Software, IT Professional Services, IT
Outsourcing and Communications and Network Services. Press
interviews can be arranged through Jessica Primanzon.
About Deltek
Deltek (Nasdaq: PROJ) is the leading global provider of
enterprise software and information solutions for professional
services firms and government contractors. For decades, we have
delivered actionable insight that empowers our customers to unlock
their business potential. 15,000 organizations and 2 million users
in over 80 countries around the world rely on Deltek to research
and identify opportunities, win new business, optimize resources,
streamline operations, and deliver more profitable projects. Deltek
– Know more. Do more. ® www.deltek.com.
Follow us on Twitter @GovWin or @Deltek. Like us on
facebook.
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