Governments Tighten IT Budget Purse Strings

Selling IT to the government was never easy, but it's about to get harder. According to new research from Gartner, 26 percent of national and federal public sector agencies will be cutting their IT budgets this year, with the remainder reporting flat or slight increases to their 2013 budgets. 

There is one bright spot: If you sell SaaS deployments or applications, your chances of getting a foot in the door have improved. SaaS, it seems, has become the new darling of federal number crunchers.

Government IT Spending Cuts

Analysts Rick Howard and Poh-Ling Lee revealed the figures in the recently released 2014 CIO Agenda: A Government Perspective (fee charged), Gartner’s annual look at IT budgets and agendas in public agencies.

This is no quick snapshot of the current state of public IT spending. This comprehensive global survey was based on questionnaires returned by 2339 respondents, 288 of whom work in government in all jurisdictions, regions and domains, including defense.

Though the findings will make some IT sellers uneasy, for others it will confirm trends that have emerged over the past few years, including a growing trust in the security of SaaS products.

According to the report, government IT is feeling the pressure to cut spending -- with announcements about cuts to defense being a recent example. The results have seen many departments and federal agencies turning to IT to see how much can be cut.

IT vs. Business

Further complicating the life of CIOs is the fact that business units other than IT now spend 33 percent of IT budgets, resulting in an increase in shadow IT:

Regardless of how much IT spending happens outside of the IT organization, CIOs must address the presence of shadow IT by affirming their position as the designated and recognized point of IT management responsibility. This doesn't mean CIOs should attempt to restrict business-managed IT acquisitions and services. However, accountability for the information assets of a government agency cannot be distributed, and governance will ensure a corporate officer, the CIO, is at the table whenever or wherever an IT investment is being considered."

In other words, business and IT departments need to start working together or one of them will risk becoming irrelevant.

Digital Change, Ready or Not

There is good news in the survey, albeit indirectly. The results point to a work environment where every aspect of business and government is becoming more specialized, which is creating a strong need for digitally savvy executives and IT professionals.

Only 5 percent of government agencies currently have Chief Digital Officers (CDO) -- which is just behind the global average of 6.6 percent in the private sector. But it may be some time before public organizations can persuade bean-counters to release the money for an additional position at the C-Suite level.

Governments will be forced to act whether they want to or not, with the emergence of initiatives like open data, the emergence of smart cities and the Internet of Things beginning to impact how the government goes about its IT business.

For a large number of government IT workers, change is coming. The survey showed over 75 percent of government CIOs reporting they will change their technology and sourcing approach within the next three years.

Sixty percent of government CIOs currently manage a "mixed model" of providers, with 26 percent depending on a mainly or wholly insourced approach and 13 percent taking a mainly or wholly outsourced approach.

The puts the onus at all levels on management and managing resources in what is becoming an increasingly diverse ecosystem of services and applications.

Successful CIOs are restructuring their IT portfolios to provide higher-value-added business services and technology capabilities, with new additions like advanced analytics and business process management. This will results in the development and implementation of strategies that will promote architecture standardization, interoperability, robustness, agility and security, according to the report.

Title image by Tara Hunt (Flickr) via a CC BY-SA 2.0 license