What Does the Waning Bull Market Mean for Federal IT Services Contractors?

Aggressive investment by federal agencies to modernize and secure monolithic IT infrastructures, particularly healthcare-related IT systems, and digitize defense networks has resulted in an expanding federal IT market. In federal fiscal year (FFY) 2020, FFY21, FFY22 and FFY23 the market experienced unprecedented growth, at 8.1%, 8.5%, 7.9% and 8.5% year-to-year, respectively, on a weighted average basis.

Additionally, TBR is currently tracking federal IT annual revenue growth of 6% to 8% to between $68 billion and $69 billion in total market value by the end of FFY24 (ending Sept. 30, 2024). (Data based on total federal IT revenue earned by the 11 federal systems integrators tracked in TBR’s Federal IT Services Benchmark.)

Looking toward FFY25, the Biden administration is seeking the smallest increase in federal civilian technology spend in many years, while the Department of Defense’s FFY25 request for IT and cyberspace activities is down from FFY24.

As was the case in 2020, election-related disruptions could undermine the ongoing boom in the civilian IT market, at least temporarily. IT leaders in agencies are under increasing pressure to demonstrate how effectively they have invested the IT budget windfall they have enjoyed since FFY20. Even with slowing budget growth, tech priorities remain unchanged, with citizen-facing agencies investing heavily in AI and other technologies to optimize citizen experience and engagement.

In the below TBR Insights Live video, Federal IT Services Senior Analyst John Caucis, Principal Analyst & IT Services Practice Manager Patrick Heffernan, and Federal IT Services Analyst James Wichert deep dive into the current state of the federal IT market and expectations for the future, including sharing key findings from TBR’s most recent Federal IT Services Benchmark.

The team will highlight top trends in civilian, defense and intelligence sectors and detail the newest alliances, acquisitions and solutions introduced. Additionally, they’ll look at how TBR-tracked federal systems integrators are positioning for Federal FY2025.

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TBR’s Federal IT Services Benchmark focuses almost exclusively on the U.S. federal It market. This research provides growth data and analysis specific to the federal defense and federal civilian sectors. Some of the vendors we track have operations in public sector markets outside the U.S. federal government sector.

Additionally, we detail some additional developments and/or market trends in other public sector markets in the appendix, but our principal research and analytic focus remains the U.S. federal IT sector.

To access the research and dataset, sign up for your TBR Insight Center™ free trial today!