More Bread In Bush's IT Budget

President Bush might have proposed a relatively modest 2006 budget, with overall discretionary spending up just 2.1 percent, but such skimping did not come at the expense of IT. Much of the allotted $65 billion for technology -- an increase of about 7 percent -- will likely go to outsourced services and systems integration, sources say, as agencies focus less on products and more on solutions.

In particular, government-wide homeland security IT initiatives will rev up significantly, with an increase of 42 percent from 2004 to 2006 -- $748 million to $1.13 billion in the second year alone.

"There are important delivery areas, military being most important," says Harris Miller, president of the Information Technology Association of America (ITAA). "Network-centric warfare, IP technology, information exchange and law-enforcement intelligence all require major IT investments."

Those IT investments reveal substantial opportunity for growth in the private sector, as broader IT initiatives require specialized expertise. In that sense, the majority of outsourced dollars will go to companies that can provide the total package -- not just products.

"There's a realization in the government that much of the needed functionality can be performed better, cheaper, faster and more efficiently by the private sector in partnership with the government," Miller says.

Particular focus will be placed on management strategy -- finding common solutions through an enterprise architecture approach, instead of a piecemeal process.

"This has become a conceptual byword in the administration, and now the challenge is to actually see it implemented. They're not looking from the bottom up -- how to put together particular pieces of hardware, software or telecommunications. What they're looking for is a solution to a given problem."

A 35 percent increase in spending by the Department of Homeland Security will support initiatives to strengthen terrorist-prevention programs, expand electronic baggage-screening capabilities and combine credentialing. That will mean increased opportunity for those VARs selling new sensor technologies -- such as biometrics or RFID tags. In addition, Line of Business Service Centers will be funded to improve financial and human resources management.

"Government agencies will turn to professional firms that can help define requirements, outline and manage projects, and ensure successful execution," says Ray Bjorklund, senior vice president and chief knowledge officer at McLean, Va.-based Federal Sources, a government IT market intelligence firm.

<B>OMB Approval</b>

Of course, how or if agencies can spend their allotted dollars isn't a done deal just because it appears in a proposed budget. The Office of Management and Budget (OMB) acts as the gatekeeper, Bjorklund say, and has the authority to control the dollars appropriated.

OMB has been making certain that every business case going forward for an IT project has qualified program management. In 2004, for example, some agencies were told that they were not ready to take on projects, and not ready for their money. As a result, OMB reported actual IT spending for the year to be $500 million less than what was enacted in the budget -- spending $58.6 billion of the designated $59.1 billion.

"Companies reported seeing a definite lag time and deals not coming through as quickly as expected," Bjorklund says. "Now, if you look at what they anticipate in 2005 and the 7 percent growth beyond that, the slowdown will be met with a newfound acceleration."