This is an opportune time to put a stake in the ground – to talk about the ongoing costs of operating the U.S. federal government's data centers.
Currently, agencies are working to comply with the Data Center Consolidation Initiative (DCOI), which requires them to count the number of datacenters they operate (the total number is in the thousands) and to also count servers, associated hardware and software, plus the types of IT solutions being supported. Agencies are required to track the amount being spent on various components within their datacenters, and they need to make plans to reduce those costs.
However, as we focus on potential cost reductions, IDC does not anticipate that many agencies will see an immediate decrease in data center spending. Here's why: It can cost money to migrate current solutions to new platforms, and it's not always easy to simply turn out the lights in a data center, even if it is slated for closure.
Also, the DCOI does not have any special funds set aside to help with the closures, so agencies will be tackling the effort as best they can with available budgets. Our experience has shown us that the government's legacy systems have a tendency to linger longer than anticipated when agencies work to move them to new platforms, especially when they lack the funds to make the change quickly.
Where the Money Goes
IDC believes that data center spending in the U.S. Federal government will experience slow growth between now and 2020. We do not expect to see broader, multi-agency cost reductions until after that timeframe. The total amount spent is expected to grow from $5.5 billion in FY15 to $5.8 billion in FY 2020. (Note: The numbers do not include telecommunication costs or connectivity fees for internet and other network access.)
The anticipated federal data center spending shows…
This week, IDC Government Insights announced the results of its 2017 IDC Government Top 50 Vendor Rankings. These rankings use a standardized methodology to publish the estimated IT revenue of the top vendors serving the U.S. federal government. IDC examines thousands of different federal IT contracts, and then isolates the spending by fiscal year. We send our estimates to the companies for their consideration and potential feedback.
These numbers focus strictly on estimated revenue from the sale of hardware, software and IT services. The numbers do not include things like staffing costs, business process engineering, or other non-IT spending. This approach is unique to IDC. It makes our numbers lower than what can be seen on other government top IT vendor lists, but we believe this approach is a better measure of what is truly "addressable" IT spending by the federal government.
These Top 50 rankings reinforce the benchmarks laid down last year in the inaugural version of this effort. For over 50 years, IDC has collected and analyzed IT industry data. This annual effort focuses on the Top 50 IT vendors who mainly serve the government market. But we also create an "Enterprise Top 25" list - which ranks the largest IT vendors that serve multiple industries. (The rankings are mutually exclusive.)
The two categories of the government IT vendor rankings are as follows:
Some interesting long-term trends are taking shape within U.S. federal government IT spending. The changes are sure to have an impact on agencies’ ability to comply with requirements set forth by the Data Center Consolidation Initiative (DCOI), which came out of OMB a little over 13 months ago. A new set of deadlines for DCOI are slated to kick in this fall. But are they properly funded?
We will go into significant detail on these issues during our upcoming Webcast, titled The State of Federal IT Spending: Looming Challenges for Fiscal Year 2018 on Wednesday, Sept. 13, at 11 a.m. EST. Hope you can join us.
Here’s a little preview.
Before exploring what impact these new spending patterns may have, let’s take a moment to look at the proposed FY 2018 Federal IT budget.
- The federal IT budget for Fiscal Year 2018 is set at $95.7 billion.
- "Officially" that's an increase of…
Shifting priorities in U.S. federal information technology spending can best be understood by holding a lens up to two recent trends.
1.Total federal cloud spending for Fiscal Year 2017 is expected to decrease by 17.2% (vs. FY 2016). That’s a substantial drop, from $2.6 billion to $2.2 billion.
- Besides classic cloud spending, this year, federal agencies will spend $4.1 billion on cloud-like solutions, which are best described as falling into a provisioned/shared services/other category. This too is down a bit, from $4.6 billion last year.
- This mix of formal cloud spending and quasi-cloud spending is why you sometimes see total cloud spending listed as somewhere in the mid $6 billion range.
2.Total Federal IT security spending for FY 2017 is expected to increase 7.9%, from just under $3.5 billion to a little over $3.7 billion.
While the Trump administration has emphasized that it will focus on various types of cost cutting for the next few years, the decrease in cloud spending actually has its genesis in the formulation of the FY 2017 budget, which took place before the 2016 election.
Basically, cloud plans are hitting the doldrums this year, after several years of steady growth. But security spending has ramped up in response to rapidly expanding networks (thanks to the Internet of Things) and multiple international hacking attempts.
The Ups and downs of Cloud
For cloud spending, a decline of this magnitude was unexpected, especially given the multiyear double-digit growth trajectory we’ve seen for federal cloud investments. But the good news is that FY17 appears to be an anomaly. The long-term potential for federal cloud growth remains solid, and we very much expect to see spending increases resume for fiscal years 2018 through 2021.
There are several reasons for the temporary decline.
- The full federal IT budget…
There's one fundamental thing to keep in mind when it comes to border protection. Knowing and tracking an intruder's direction of travel can be much more important than building a physical barrier. Human beings are very creative when it comes to getting around things that block their progress, so once a border is breached, actual enforcement happens after the crossing.
A couple of years ago I had a chance to meet a group of border patrol agents from Texas. They were in Washington D.C. to participate in a conference focused on police and national security issues.
We talked about ways to close the holes in the U.S. Mexican border and the subject of walls came up. One of the officers rolled his eyes. I don't remember his exact words but he stressed that walls are great for urban areas, but they have minimal impact in rural areas where the nearest border patrol agent might be located miles away.
The same can be said for sensors – if those sensors are located only along the border itself.
Spread too Thin
Once someone manages to illegally cross a border, including a border wall, the agent said, they can run in any direction. When a border patrol officer arrives in the area where a sensor has been tripped, he or she has to figure out which direction the intruder went. Even with a helicopter, that can mean searching many miles of terrain, and people can be very good at hiding.
Governments are confronted with a complex context driving them to come up with new policies, service delivery models, and operational excellence practices. Digital transformation will be the force underpinning the ability to seize the opportunities and manage the risks in this environment. The IDC FutureScape: Worldwide Government 2017 Predictions document predicts the top 10 trends that will impact government departments and agencies worldwide that are engaged in a digital transformation journey aimed at:
- Improving the citizen experience
- Harnessing the power of data
- Leveraging the power of 3rd Platform technologies to enable agile innovation and sustainable scalability of secure systems
Government IT executives will find themselves at the center of transformation. They should embrace the opportunities or address the risks brought about by the following trends:
- Prediction 1: In 2017, 40% of government CIO offices will have the capabilities to adopt a Leading in 3D model.
- Prediction 2: In 2017, 20% of government agencies will retire at least one piece of enterprise software, moving toward platforms capable of integrating multivendor software modules.
- Prediction 3: By 2018,…
It's no secret that some legacy federal IT systems have grown into digital behemoths that seem to be eating the U.S. federal information technology budget. It's also important to stress that digital transformation (DX) becomes increasingly difficult if less money if available to actually make the transformation.
Our recent analysis of civilian agency IT budgets helped highlight just how pervasive the problem has become.
Legacy IT: Over 77% of the IT budget and Growing
This research was conducted while putting together this document: Business Strategy: Government Federal Civilian IT Forecast, 2016–2020.
Across all agencies, average spending on "operations and maintenance" of IT systems (which essentially means support for legacy systems), is 77.7% of agency budgets, versus 22.3% for development and enhancement. Eight years ago, this division was closer to 66% for legacy systems. Since then, the amount of…
Does the U.S. Federal government spend too much money for its Information technology solutions? Short answer - yes. But the reasons are complicated and not easy to fix. Compared to other industries, the mission of government is unique, which can make an apples-to-apples comparison of IT budgets a bit of a challenge.
Still, we here at IDC Government Insights wanted to know – how much does the U.S. federal government spend on IT per employee? And how does this expense ratio stack up against other industries?
We pulled the data together in a document called An Asset Management Enigma – U.S. Agencies Spend nearly four Times More on IT per Employee vs. Industry Average.
The title of the document helps tell the story.
On average, the U.S. federal government does indeed spend significantly more on information technology, per employee, than other industries. (Keep in mind that we are talking about all agency employees, not just IT staffers). Here's how it stacks up.
- Currently the federal…
Digital transformation (DX) continues to be a hot topic in government. But the transformation efforts of many gov CIOs quickly reach a fork in the road. That means a key choice must be made upfront, before fundamental transformation can get underway.
The fork is pretty basic. Should an organization stay on one path, continuing with its legacy systems? Or should IT planners take a different path and start over again — with a so-called "greenfield" initiative?
The choice may be basic, but the consequences loom large.
I believe that going greenfield is often a better choice, given the way Third Platform initiatives have changed the nature of IT sourcing. Third platform technologies also have helped cut solution costs while boosting long-term IT flexibility. So, in theory, starting over gives organizations a chance to build their system "the right way" this time.
But it's not fair to say the greenfield approach is always the best choice. Migration costs can be steep, especially if an agency is moving away…
IDC Government Insights, in conjunction with FedScoop, is excited to launch the Federal IT Rankings! The Call for Entries has now opened and we would like to welcome nominations of government institutions for the 2016 Federal IT Rankings. Read on for more information…
The 2016 Federal IT Rankings categorize and evaluate technology providers based on calendar year revenues from government institutions for computer hardware, software, and/or IT services.
Full information can be found on the Federal IT Rankings webpage. Nominate your company by clicking here and completing the online survey. A PDF of the survey form is also available as an attachment to this post to help assist you in gathering information. However, all applications must be completed and…
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