May 22, 2003 11:10 AM PDT

Federal IT security budgets to bloom

Spending by federal agencies on information technology security will show steady growth and hit $6 billion by 2008, according to a new study.

The study, released Thursday by market research firm Input, found that the security sector will post an annual growth rate of 7 percent over the next five years, even though other areas of the technology industry are taking a hit right now from the economic downturn. In 2002, federal agencies spent $4.2 billion on computer security.

Although encouraging, the projected growth does not compare with the whopping 200 percent increase in federal spending that IT security companies have captured in the two years since the Sept. 11 terrorist attacks.

"After this explosive growth, we are now seeing budget increases return to more normal levels," said Payton Smith, a federal market analysis manager at Input.

Companies received a tremendous boost from security-related software and hardware sales after the terrorist attacks. In contrast, future growth will largely be driven by sales of consulting services, where companies help government agencies implement the security technology they have acquired.

"Federal agencies still face substantial challenges implementing infrastructure protection and security plans, so reliance on the vendor community for support in this area will remain high," Smith said.

At the e-security RSA Conference this year in San Francisco, it was estimated that nearly 80 percent of all security funding will be spent on hiring people to implement these new systems.

Input's study also found that while the government has created the Department of Homeland Security to serve as coordinator of government-wide security efforts, much of the purchasing decisions still remain with individual federal agencies.

 

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