Federal government IT spending is poised to drop 8 percent in 2013, the biggest plunge in the last dozen years.
That was the forecast from Rishi Shood, vice president of government research for Gartner, in the opening keynote address Wednesday at the XChange Public Sector conference in Charlotte, N.C.
In an address titled "Public Sector’s New Market Realities- Innovative Tactics For Turbulent Times" Shood predicted federal government IT spending will drop from $79.2 billion in 2012 to $75.2 billion in 2013. What’s more, Sood forecast another four percent plunge in 2014 to $73.2 billion. Sood said the market growth could return in 2015 or be off just slightly to $71.7 billion.
No matter what happens in 2015, technology trends like cloud computing are “fundamentally changing” the federal IT market, said Sood. Federal integrators looking at the downturn as a temporary correction and betting that once the presidential election is decided later this year, there will be a return to the “good old days” are mistaken, said Sood.
“One way or another the tremors taking place with technology in the federal government market are going to be long-lasting,” he said.
Sood sees cloud computing driving a shift away from highly siloed federal government IT agencies to a new era of shared services reaching across government agencies.
So what do federal integrators need to do to make it through the IT spending downturn? Shood is advising integrators to look at “right-sizing” initiatives internally to get “leaner.” What’s more, he said, integrators need to make sure they are “focused on the right segments, the right offerings and the right type of [government] organization,” he said.
“What is selling today are IT solutions that impact the bottom line,” said Sood. “If [federal integrators] are not lining up their business offerings with how it transforms or improves a business process within a [federal] agency, they are not going to be doing well.”
One ripe market opportunity, Sood said, is the federal health care IT market which is growing at a nine percent clip to $14 billion, said Sood. In fact, he said, the health care IT market is one the few where integrators can win selling big data business solutions.
Federal integrators also need to revamp their internal sales force compensation model to get their sales reps to go after the the cloud computing services opportunity, said Sood. “Sales people are not going to chase these kinds of opportunities if they are not incented properly,” he said. ”There is a big difference between selling a $100 million three-year contract versus selling a cloud deal.”
Sood is advising vendors to create a subset of their sales force that has a solid grasp on selling cloud computing services and are “compensated on a different structure” than the more traditional sales force. “It is like creating a sales subset in your organization,” he said.