Will Congress crush tech spending?

FRAMINGHAM — The failure of the Congressional Super Committee to reach a U.S. deficit reduction agreement triggers automatic federal spending cuts beginning the next fiscal year, which will likely make a lot of American government IT contractors nervous.

Beginning in fiscal 2013, the government will have to cut US$1.2 trillion over 10 years under a process called “sequestration.”

The first indications of how those cuts may impact federal tech spending may appear in the first federal budget proposals expected in February. The impact of the cuts on tech companies may be mixed, say analysts.

Ray Bjorklund, chief knowledge office at Deltek (formerly Federal Sources), believes that federal IT spending will still rise one or two per cent in the next budget.

The government, which has been consolidating data centres and moving to public clouds for some services, such as email, to cut costs, views IT spending as an enabler for improving efficiency, said Bjorklund.

The U.S. has already outlined plans to close 962 of some 2,800 data centres by 2015. The government counts any IT facility over 100-square-feet as a data center.

But Bjorklund also warns tech companies that an agency or department may, at the spur of the moment, “pull the plug on a proposed acquisition.”

Similarly, Shawn McCarthy, a government analyst at IDC, doesn’t believe that IT operations will be hit as hard as some other areas of government. He added, though, that “if a full program is eliminated, any IT systems associated with it are bound to be eliminated.”

More than 50 tech companies represented by TechAmerica sent a letter to the Super Committee last week urging it to avoid “the sequestration trigger.”

“Sequestration would undermine our national security. Further, this mechanism should be avoided in future deficit reduction efforts so budget cuts can be prioritized and targeted, not precipitous,” wrote the industry group.

TechAmerica also asked the committee to reconsider the US$4 trillion in deficit reduction that had been discussed earlier by Congressional leaders and the White House. “America’s growing national debt is undermining our global competitiveness,” the industry group wrote.

(From Computerworld U.S.)

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