October 19, 2005 2:10 PM PDT
Katrina dollars may not mean tech largesse
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President Bush signed over more than $60 billion in two emergency spending bills during September. But unlike after the events of Sept. 11, 2001, or the start of the Iraq war, the supplemental spending is going primarily to back humanitarian aid, not tech-heavy intelligence and safety operations, and that's bad news for IT firms, according to one recent report by INPUT, a Virginia-based market research firm.
For INPUT's clients, many of whom are IT firms that do business with the federal government, "there's always this sort of knee-jerk excitement whenever there's any supplemental federal spending," said Payton Smith, INPUT's director of public sector market analysis.
But not in this case: In the report, INPUT estimated that no more than $20 million to $60 million of the supplemental package would go to IT projects. The government spends between $60 billion and $70 billion each year on information technology across the board, according to Smith's estimates.
The increased focus on the Federal Emergency Management Agency could also lead to uncertainty in the entire Department of Homeland Security's IT budget, another report charged.
A Homeland Security spokesperson declined to comment on the report or budgetary matters on Wednesday.
The department has been vocal about its desire to promote private-sector, terrorism-fighting technology and has been working on streamlining the procedures by which tech firms receive contracts.
But the billions of supplemental dollars for Katrina relief efforts only add to the ballooning federal deficit, Smith said, and as the government takes steps to dig its way out, tech firms should expect to see slow to flat growth in IT spending.
"There's been enough spending in tech lately that that's probably going to be one of the targets of deficit reduction," Smith said, pointing to government modernization projects dating back to the personnel cutbacks of the Clinton administration and the Y2K frenzy. "We don't feel it's going to be immune from deficit reduction at this point."