Kevin Plexico Sr. Vice President, Research and Analysis Services INPUT

1. Kevin PlexicoSr. Vice President, Research and Analysis ServicesINPUT Federal IT Forecast, 2010-2015 August 2, 2010

2. Agenda • Scope and Methodology • Trends and Drivers • Budget Environment • Performance and Accountability • Human Capital • Technology Priorities • Acquisition Trends • Technology Forecast • Conclusions and Recommendations

3. Scope and Methodology Scope Methodology • U.S. federal information technology (IT) spending FY2011 budget request • Includes • Executive branch • Legislative and Judicial branch • Intelligence Community • Government-owned corporations • Excludes • Embedded computer systems • IT grants to state governments from HHS and USDA • INPUT bases its analyses, segmentation, forecast, and conclusions on: • President’s FY2011 budget request and supporting documentation • FY2011 OMB A-11 circular and Exhibit 53 Information Technology budget artifacts • Individual Departmental FY2011 budget plans • Historical data on federal spending on programs and technology • Economic forecasts for GDP & discretionary spending • Analysis of agency plans and INPUT Opportunities Database • Interviews with agency officials and industry experts

4. INPUT Survey Methodology • Survey Methodology • One-on-one telephone interviews with industry and government technology professionals • Web-based surveys targeting industry and government technology professionals • Respondents assured that all responses to be reported in aggregate

5. Trends and Drivers

6. Federal Outlays as a Percentage of GDP World War II CBO Estimates Vietnam War Korean War Defense Build-Up Source: CBO; Bureau of Economic Analysis; INPUT Budget/Policy

7. Technology Budget Request Total IT Budget Request: $79.4B Overall Percent Change: -1.6% +3% -63% +7% +25.4% +33% -2% -5% Source: FY2011 OMB’s Report on Information Technology (Exhibit 53) Budget/Policy

8. Obama Policy Priorities and Impact on Technology Energy/ Conservation Healthcare Broadband Cybersecurity

9. Health IT Funding Ecosystem

10. Cloud Computing Cloud Computing Evolution FEDRAMP Centralized security certifications service SAJACC Use case validation of cloud offerings as an interim “standard” BUDGET REQUIREMENTS Cloud computing alternatives analysis within the budget process Technology

11. Data Center Consolidation Technology

12. Federal Spending Continues to Outpace Available Workforce to Manage and Implement Source: OPM, OMB, INPUT Human Capital

13. Major Acquisition Reform Goals • Save $40 billion in contract spending - • Reduce contractor spending by 7% (3.5% in 2010 and in 2011) by identifying wasteful, inefficient, or ineffective programs. • Increase contracting transparency • Reduce the combined use of ”high-risk contracts,” e.g. no-bid contracts and cost-based contracts, on new contract actions by 10% (over FY08 baseline). • Insource “inherently governmental” work • Clarify “inherently governmental” and consider in-sourcing. • Increase the acquisition workforce • Grow the acquisition workforce by 5% and increase expertise. • Centralize IT acquisitions • Centralization of key IT services • Federal eMall for smaller purchases Acquisitions

14. Spending on Task Order-based Contracts Source: FPDS, INPUT

15. Recent Developments • Cut 5% of FY12 discretionary budgets • Freeze on financial system modernization projects with $20M+ in planned spending • IT project reviews • Assessment of IT procurement and management practices

16. Technology Forecast

17. IT Budget Requests vs. Actual Only once since 1994 has actual IT spending been less than a president’s IT budget request. Source: OMB, INPUT *Enacted **Assumes 103% of FY11 request. FY10 figures are OMB estimates.

18. Addressable IT Forecast by Buying Segment Source: OMB, INPUT

19. Market Segment Forecast Source: INPUT

20. Conclusions and Recommendations

21. INPUT’s Take • There is still reason to be optimistic. Although overall government spending may contract, IT has some level of immunity for a number of reasons: • Historical spending trends • Initiatives and objectives dependent on IT • Slow pace of insourcing; IT expertise is a major gap for government • Other low-hanging fruit for spending cuts (e.g. weapons systems, manual processes, non-IT professional services, physical security, etc.) • “Near-term” technology priorities revolve around: • Leveraging shared services (e.g. cloud computing, data center consolidation, geospatial technologies);  • Automating processes to improve delivery of citizen services; • Advancing information security: move to real-time security, improved ID management, cyber incident sharing; and • Investing in technology infrastructure to reduce costs and energy consumption • Security requirements will become much more robust (e.g., legislation, Cyberscope, FedRamp, etc.) • Congress still appears hesitant to put “teeth” into security compliance (e.g. cyber coordinator budget control, security plan approval, etc.)

22. Recommendations • Track agencies’ tech refresh cycles; likely target for investments to support cloud computing, virtualization, green electronics, etc. • Pay close attention to Congressional activity: • Be aware of the technology and policy implications of the numerous bills coming out of Congress • Election year will likely mean not much major budget cutting will occur until after elections • Keep an eye on agencies with significant changes to or expansion of mission for opportunities: • VA – Projected expans • IRS and HHS – health care reform (kicking in at the tail end of the forecast period) • Anticipate future compliance requirements as a requirement to do business with government, such as: security of operations, carbon footprint, financial records related to government-funded projects

23. Q&A