TECH DATA PARTNER SUMMIT 2015 FEDERAL TECH TRENDS AND OPPORTUNITIES Jesse Holler Quantitative Analyst Bloomberg Government May 13, 2015

Source: Bloomberg Government proprietary federal procurement database; ITDashboard, President’s FY 2016 budget request WHAT DOES THE FEDERAL TECH MARKET LOOK LIKE $62B in IT obligations for fiscal % of IT dollars awarded through MACs in fiscal 2014 of proposed IT spending growth from 2015 enacted budget to 2016 request $1.4B $21B of small-business IT dollars in fiscal 2014

WHAT’S THE BUDGET OUTLOOK?

CIVILIAN AGENCIES WOULD DRIVE GROWTH, WHILE DOD CLASSIFIED WOULD REBOUND Source: President’s FY 2016 budget request Civilian fiscal 2016 IT budget request Defense fiscal 2016 IT budget request Unclassified spending, current dollars in billionsCurrent dollars in billions 5.9% CAGR 0.6% CAGR ClassifiedUnclassified $36 $37 $36 $37

MORE I.T. MONEY REQUESTED FOR MOST CIVILIAN AGENCIES Fiscal 2016 IT budget request Fiscal 2016 IT budget request biggest winners and losers Current dollars in millionsFiscal 2016 request versus fiscal 2015 enacted Note: DHS – Department of Homeland Security, DOL – Department of Labor, DOC – Department of Commerce, SSA – Social Security Administration Source: ITDashboard – President’s FY 2016 budget request

AGENCIES OUTSIDE OF MILITARY SERVICES DOMINATE THE DOD I.T. BUDGET Fiscal 2016 IT budget request Fiscal 2016 IT budget request biggest winners and losers Current dollars in millionsFiscal 2016 request versus fiscal 2015 enacted Source: ITDashboard – President’s FY 2016 budget request

Obligations by fiscal year, in billions of dollars Source: ITDashboard – President’s FY 2016 budget request Defense Civilian DEFENSE CLOUD FUNDING WAS SLOW TO START, BUT IS SET TO OUTPACE CIVILIAN

CIVILIAN AGENCIES PROVIDING BETTER DATA Snapshot of civilian cloud IT budget in the 2015 budget request Fiscal 2016 civilian cloud IT budget request Current dollars in billions Note: DHS – Department of Homeland Security, DOL – Department of Labor, DOC – Department of Commerce, SSA – Social Security Administration Source: ITDashboard – FY 2016 Presidents Budget Request

MARKET TRENDS

ALL FEDERAL SPENDING IS BROADLY DOWN 18 percent decline Obligations by fiscal year, in billions of dollars Source: Bloomberg Government proprietary federal procurement database

69 PERCENT OF ALL FEDERAL SPENDING WAS COMPETED IN FISCAL 2014 Not competitive Competitive Source: Bloomberg Government proprietary federal procurement database Obligations by fiscal year, in billions of dollars

Source: Bloomberg Government proprietary federal procurement database THE TECHNOLOGY MARKET BOTH CONTRASTS AND MIRRORS THE WIDER FEDERAL MARKET $2B increase in IT obligations from fiscal 2013 to % of IT dollars awarded competitively in fiscal 2014 more is spent on defense IT than civilian IT $10B

Note: Technology obligations are defined as the BGOV Markets “Technology Services” and “Technology Equipment” Source: Bloomberg Government proprietary federal procurement database TECHNOLOGY HAS FARED SOMEWHAT BETTER THAN THE LARGER MARKET First year of possible longer-term rebound Obligations by fiscal year, in billions of dollars

Note: Technology obligations are defined as the BGOV Markets “Technology Services” and “Technology Equipment” Source: Bloomberg Government proprietary federal procurement database COMPETITIVE SPENDING EXPERIENCED THE ONLY INCREASE Not competitive Competitive Obligations by fiscal year, in billions of dollars

Source: Bloomberg Government proprietary federal procurement database DEFENSE AND CIVILIAN TECHNOLOGY SPENDING ARE CONVERGING Defense Civilian Obligations by fiscal year, in billions of dollars

ARMY REDUCTION PUSHES DEFENSE LOWER; WIDESPREAD INCREASE IN CIVILIAN SPENDING Note: DISA – Defense Information Systems Agency, HHS – Health and Human Services, DHS – Department of Homeland Security, VA – Veterans Affairs Source: Bloomberg Government proprietary federal procurement database Defense top spenders Civilian top spenders Obligations by fiscal year, in billions

MULTIPLE- AWARD CONTRACTS

TOTAL MAC DOLLARS AND SHARE OF MARKET INCREASING Source: Bloomberg Government proprietary federal procurement database About 42 percent of all federal IT dollars flowed through MACs in FY13 Services account for the majority of IT MAC dollars

SPECIFIC CATEGORIES AND AGENCIES DOMINATE MACS, OUTSIDE OF THE TOP TWO Top 15 IT MACs by IT category in fiscal 2013 Top 15 IT MACs by contracting agency in fiscal 2013 Source: Bloomberg Government proprietary federal procurement database

THE TOP AGENCIES ARE PRIMARILY PROCURING SERVICES THROUGH NON-SCHEDULE MACS Army led all agencies in IT services spending on MACs in fiscal 2013 Top agencies procured IT primarily through agency-specific MACs Source: Bloomberg Government proprietary federal procurement database

HOW SMALL BUSINESS IS FARING

MULTIPLE-AWARD CONTRACTS (MACS) HAVE LED SMALL-BUSINESS BOOM Source: Bloomberg Government proprietary federal procurement database

SET-ASIDES HAVE PLAYED A CRITICAL ROLE IN ENSURING SMALL-BUSINESS SUCCESS Source: Bloomberg Government proprietary federal procurement database Share of small-business prime contract spending, FY 2007-FY 2014 Source: Small Business Administration and Bloomberg Government proprietary federal procurement database

SMALL-BUSINESSES HAVE FARED BETTER THAN THE OVERALL MARKET IN RECENT YEARS Source: SBA and Bloomberg Government proprietary federal procurement database The small-business market has been shrinking in dollar terms… …but the annual SB percentage decline was less than that of the overall market in FY 2012 and FY 2013 Percentage change in annual spending, by fiscal year

TECHNOLOGY SERVICES AND EQUIPMENT HAVE MORE THAN $20 BILLION IN 2014 SPENDING Source: Bloomberg Government proprietary federal procurement database Top 10 categories by SB contract spending in fiscal 2014 Contract spending distribution of top categories in fiscal 2014 Obligations in billions in FY 2014 (and percentage change from FY 2013)

TRENDS IN INFORMATION TECHNOLOGY

INFORMATION TECHNOLOGY MARKET BECOMING A GOVERNMENT FOCUS New IT supercategory has a preliminary definition IT outsourcing and consulting services dominate the landscape contracts continue their takeover Fixed-Price

OUTSOURCING AND CONSULTING ARE THE LARGEST SUBCATEGORIES WITHIN I.T. Notes: PSC – product service code. The following PSCs are included in multiple IT subcategories: D301: IT and Telecom - Facility Operation and Maintenance; D316: IT and Telecom – Telecommunications Network Management; D318: IT and Telecom – Integrated Hardware/Software/Services Solutions; D321: IT and Telecom – Help Desk; D399: IT and Telecom – Other IT and Telecom; J070: Maintenance/Repair/Rebuilding Equipment/ADP Equipment/Software/Supplies/Support Equipment. Source: Bloomberg Government proprietary federal procurement database. FY14 obligations (in billions) Percentage change, FY13-FY14 Number of contracts, FY14 Top PSC by sales, FY14 $24.68▲5%938 D399: Other IT and Telecom $21.46▼2%718 R425: Support Professional - Engineering/Technical $16.51▲6%696 D399: Other IT and Telecom $17.23▲9%361 D399: Other IT and Telecom $10.04▼3% : Miscellaneous Communication Equipment $1.52▲73% : Communications Security Equipment and Components

FIXED-PRICE CONTRACTS DOMINATE I.T. PROCUREMENTS; T&M FALLING OUT OF FAVOR T&M – Time and Materials Source: Bloomberg Government proprietary federal procurement database Fixed-price orders on the rise Contract type usage varies within IT subcategories

I.T. SPENDING HAS TRENDED AWAY FROM NON-SCHEDULE MACS Source: Bloomberg Government proprietary federal procurement database

and competition are trending upward Spending THE BOTTOM LINE IT Budget set to rebound in fiscal 2016 MACs are increasing their share of IT obligations

ABOUT THE PRESENTER Jesse Holler is an IT quantitative analyst with Bloomberg Government. Previously, he was a corporate finance and banking analyst at Lockheed Martin. He focused on treasury matters ranging from bank-assisted financing of large deals, to market and firm analysis. Other previous roles included financial strategy, cost and pricing. Jesse has a bachelor's degree in economics and political science from the UCF LinkedIn: Jesse

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