U.S. Government External IT Spending to Eclipse $42 Billion by 2006, IDC Says

FRAMINGHAM, MA – SEPTEMBER 23, 2002 – The market for government external IT spending in the United States totaled $28.9 billion in 2001. A new study published by IDC forecasts that this market will reach $42.2 billion by 2006, demonstrating a five-year compound annual growth rate (CAGR) of 7.8%. These figures represent the market opportunity for external IT vendors and therefore are based on external IT spending only. Total IT spending (internal and external) would more than double these amounts. Although government has a higher proportion of internal IT spending compared with other vertical industries in the United States, IDC expects that this landscape will shift over the next five years as the government faces a shortage of IT professionals and over half of the government workforce reaches retirement age. This shift will pose increased opportunities for work outsourced to external IT vendors.


"IDC's government IT market sizing focuses on quantifying the opportunity for IT vendors," said Jocelyn Young, program manager for IDC's U.S. IT Opportunity: Government and Education research program. "Government agencies face unique challenges requiring them to balance numerous political, organizational, economic, and public pressures while delivering upon a specific mission. IT stands to play a critical role in helping all levels of government agencies address some of the challenges they face."

Highlights of Key Findings:

At $28.9 billion in 2001, the U.S. government IT market outsourced to external IT vendors has been one of the sturdiest sectors during the economic recession.

The largest and fastest-growing opportunities across the forecast period will be in software and IT services.

In evaluating opportunities across federal, state, and local government, local government will represent the fastest-growing market, with federal government as the largest.

The U.S. government is turning to IT to bring sorely needed efficiencies and improvements to outdated (or nonexistent) IT infrastructures.

The government sector remains an unwieldy, bureaucratic collection of agency organizations that does not change easily or quickly. IT vendors targeting this complex market need to understand the dynamics of government spending to extract the layers of opportunity for IT.

This bulletin, U.S. Government IT Market Forecast and Analysis, 2001-2006 (IDC #27882), provides a five-year forecast for the U.S. government external IT market. In addition to an overall forecast, IDC provides data on the U.S. government IT market by IT segment (i.e., hardware, software, and IT services) and by subsector (i.e., federal, state, and local). Furthermore, IDC provides insight into the key trends impacting IT adoption in the government sector and provides specific recommendations for IT vendors that are selling into this complex, dynamic market.

To purchase this document, call IDC's volume sales hotline at 508-988-7988 or email jnagle@idc.com.

For more information about IDC's U.S. IT Opportunity: Government and Education research, please contact Jill Toole at 508-988-6915 or jtoole@idc.com.

About IDC

IDC is the foremost global market intelligence and advisory firm helping clients gain insight into technology and ebusiness trends to develop sound business strategies. Using a combination of rigorous primary research, in- depth analysis, and client interaction, IDC forecasts worldwide markets and trends to deliver dependable service and client advice. More than 700 analysts in 43 countries provide global research with local content. IDC's customers comprise the world's leading IT suppliers, IT organizations, ebusiness companies, and the financial community. Additional information can be found at www.idc.com.

IDC is a division of IDG, the world's leading IT media, research and exposition company.

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