PROFESSIONAL SERVICES, IT ACCOUNT FOR 26% OF CONTRACT SPENDING
Federal information technology spending may reach an all-time record of $78 billion this year, according to a recent Bloomberg Government report. Professional Service spending is expected to total $105 billion, a little below FY’22 totals, but still up over 14% over the past three years. Combined, the two categories of spending equal 26% of all non-classified federal buying activity. Although Bloomberg points out that debt ceiling negotiations and other factors could impact final numbers, right now it is projecting that professional services spending for the fourth quarter of FY’23 will be $36.8 billion, representing 35% of the fiscal 2023 market total. They estimate that fourth quarter IT spending will reach $30.4 billion, representing a 39% share of the fiscal 2023 market total. Nearly two-thirds of IT and service spending is in the DOD market, with civilian agencies projected to account for a little over 38%. The numbers also provide important information for government contractors. First, the government continues to rely more and more on professional service providers. That trend is unlikely to reverse anytime soon as the missions of different agencies expand, whether in response to international developments or more routine agency operations. Second, the numbers show that, while the fourth quarter continues to be the busiest time of year for acquisitions, companies miss out on over 60% of annual business in these two sectors if they only focus on year-end. It’s important to develop business year-round. Information technology needs continue to grow, but morph in different directions depending on agency priorities. Cyber, AI, including cousins such as Robotic Process Automation (RPA), and modernization efforts are among customer priorities. While Bloomberg points out that the overall picture is good, inflation may eat into corporate bottom lines. Plan accordingly.