Report Sees Rapid Growth in IT Outsourcing IT outsourcing should be one of the fastest-growing federal IT market segments over the next five years, according to the market research firm Input. The company forecasts a compound annual growth rate of 8.3%, with federal spending on IT outsourcing growing from $11.7 billion in fiscal 2004 to $17.4 billion in 2009. “Perhaps the most important factor driving the market is the fact that a significant percentage of federal IT personnel is reaching retirement age, leaving the federal government with little choice but to pursue outsourcing as a means to address a workforce shortage,” Input said. “It is projected that a full third of the current workforce’s program management will be lost to retirement by 2006.” “Vendors must be aware of individual agency personnel trends,” said Chris Campbell, senior analyst for federal market analysis at Input. “A large number of retiring personnel in one area of an agency is a strong indication of where competitions may arise.” The report predicts business process outsourcing will be the fastest growing type of outsourcing arrangement over the next five years. An example of this is the Federal Emergency Management Agency, which outsources the operation of its National Flood Insurance program, making the vendor responsible for the entire business function, including the information systems that support it. The major wild card is congressional opposition to the Bush administration’s competitive sourcing initiative. Union-backed challenges to the initiative have become a regular feature of the annual appropriations process in Congress, but so far the administration has managed to fend off most restrictions by threatening a presidential veto.