Outsourcing will grow, Input predicts

Despite recent expressions of concern from government officials and Congress, there seems to be no end to the steady outflow of government information technology work to contractors, and Input predicts an outsourcing market worth nearly $18 billion within five years.

The marketing and consulting company cites the effects of an impending federal IT workforce shortage as older workers retire, the demands of the war in Iraq and a slowdown in federal contract spending as reasons for the increase.

The biggest growth will come in the areas of business process outsourcing and application services, with a notable switch to smaller contracts and multi-sourcing arrangements and away from bigger deals, the company says.

Trina Dinavo, senior federal market analyst at Input, says there is a self-reinforcing loop at play in the market.

“Increasingly, as agencies outsource more core activities, they may not necessarily want to compete business as an [Office of Management and Budget Circular] A-76 competition when they can multi-source to procure needed services at a much faster rate,” she said.

Also, as the new Congress questions their competitive sourcing strategies, Dinavo expects agencies use outsourcing more often as a path of least resistance.

However, the most important factor that will cause the outsourcing market to expand to an estimated $17.7 billion in fiscal year 2011 from $13.3 billion in fiscal 2006 will be the retirement of the older generation of government IT workers, she said.