In tough times for IT vendors, their best customer may live in a big white house on Pennsylvania Avenue, according to a recent report from the Yankee Group. Yet much of the recent spike in government spending is short-term, and future growth will be focused on a few key areas, the report says.
The analysis of federal government technology spending indicates that, while security and e-government applications are the current hot items, these will cycle through quickly, said Carrie Lewis, senior analyst at Boston-based Yankee Group.
"We're going to see a spike, but it's going to quickly drop off, maybe as soon as [the] administration changes," Lewis said.
The report predicts that certain other business areas will remain strong, particularly network and seat management, accounting and financial areas, and enterprise resource planning and CRM.
"The Department of Health and Human Services and the Treasury are the top spending agencies," Lewis said. "What they're spending their money on is the nuts and bolts."
Compared with the private sector, federal spending is strong. Along with state and local agencies, government spending will rise as much as 18% this year, while commercial spending should be up between 3% and 5%, Lewis said.
Part of that growth is the government playing catch up to private companies that quickly made large technology investments, which peaked at the end of the '90s. The Bush administration has focused on modernizing government technologies to make them "citizen centric," according to Lewis.
Indicative of this is the creation of a 311 CRM system in New York City, which allows residents to contact government by phone without tying up the 911 emergency line, Lewis said. What it all means is more avenues for citizens to reach out to government, while vendors should focus on long-term opportunities, according to Lewis.
"The spike is happening now," Lewis said. "The question is if there is a change in leadership, how is spending going to refocus itself? In the longer term, agencies are going to improve operations and streamline their capabilities."
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