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

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 2014

40% 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’STHE BUDGETOUTLOOK?

FY 2013actual

FY 2014actual

FY 2015enacted

FY 2016request

$41$44

$48 $49

FY 2013actual

FY 2014actual

FY 2015enacted

FY 2016request

$32 $31 $30 $31

$5 $6 $6 $7

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 requestUnclassified spending, current dollars in billions Current 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 requestFiscal 2016 IT budget request biggest winners and losers

Current dollars in millions Fiscal 2016 request versus fiscal 2015 enacted

HHS

DHS

Treasury

VA

Transportation

Agriculture

Justice

Commerce

SSA

State

Energy

NASA

Interior

Labor

Education

$11,351

$6,201

$4,503

$4,403

$3,326

$2,789

$2,732

$2,333

$1,694

$1,632

$1,496

$1,390

$1,099

$821

$683

HHS

DHS

Treasury

VA

Transportation

Agriculture

Justice

Commerce

SSA

State

Energy

NASA

Interior

Labor

Education

-10%

4%

19%

5%

6%

3%

4%

8%

7%

15%

-1%

-2%

23%

Note: DHS – Department of Homeland Security, DOL – Department of Labor, DOC – Department of Commerce, SSA – Social Security AdministrationSource: ITDashboard – President’s FY 2016 budget request

AGENCIES OUTSIDE OF MILITARY SERVICES DOMINATE THE DOD I.T. BUDGET

Fiscal 2016 IT budget requestFiscal 2016 IT budget request biggest winners and losers

Current dollars in millions Fiscal 2016 request versus fiscal 2015 enacted

Defense-wide

Army

Navy

Air Force

$11,139

$7,555

$6,490

$5,284

Defense-wide

Army

Navy

Air Force

2%

3%

4%

-3%

Source: ITDashboard – President’s FY 2016 budget request

Obligations by fiscal year, in billions of dollars

2014actual

2015enacted

2016request

$850.5

$2,452.0 $2,618.5$715.4

$3,951.3 $3,868.7

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

FY 2014 actual

FY 2015 enacted

FY 2016 request

$0.0

$500.0

$1,000.0

$1,500.0

$2,000.0

$2,500.0

$3,000.0

DHS DOL Treasury DOC All others SSA

FY 2014 enacted

FY 2015request

$0.0

$500.0

$1,000.0

$1,500.0

$2,000.0

$2,500.0

$3,000.0

DHS DOL Treasury DOC All others SSA

Current dollars in billions Current dollars in billions

Note: DHS – Department of Homeland Security, DOL – Department of Labor, DOC – Department of Commerce, SSA – Social Security AdministrationSource: ITDashboard – FY 2016 Presidents Budget Request

MARKET TRENDS

ALL FEDERAL SPENDING IS BROADLY DOWN

2010 2011 2012 2013 2014

$535,831,637,014

$535,452,513,562 $514,332,91

3,615 $459,855,562,933 $440,227,79

0,389

18 percent decline


Source: Bloomberg Government proprietary federal procurement database

2010 2011 2012 2013 2014

$369$358

$341$308 $305

$166 $177 $174$152 $135

69 PERCENT OF ALL FEDERAL SPENDING WAS COMPETED IN FISCAL 2014

Not competitive

Competitive




THE TECHNOLOGY MARKET BOTH CONTRASTS AND MIRRORS THE WIDER FEDERAL MARKET

$2B increase in IT obligations from fiscal 2013 to 2014

75% 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

2010 2011 2012 2013 2014

$70,295,163,397 $66,622,255,

273$65,467,840,

561 $60,150,954,873

$61,962,191,344


2010 2011 2012 2013 2014

$49 $47 $47$44 $46

$21$19 $18 $17 $16

Note: Technology obligations are defined as the BGOV Markets “Technology Services” and “Technology Equipment” Source: Bloomberg Government proprietary federal procurement database

COMPETITIVE SPENDING EXPERIENCEDTHE ONLY INCREASE

Not competitive

Competitive


2010 2011 2012 2013 2014

$46,181,721,

206

$36,256,461,381

$24,109,873,

875

$25,701,711,

604


DEFENSE AND CIVILIAN TECHNOLOGY SPENDING ARE CONVERGING

Defense

Civilian


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 AffairsSource: Bloomberg Government proprietary federal procurement database

Defense top spenders Civilian top spenders

2010 2011 2012 2013 2014$0

$10,000,000,000

$20,000,000,000

$30,000,000,000

$40,000,000,000

$50,000,000,000Navy Army Air Force DISA Other

2010 2011 2012 2013 2014$0

$10,000,000,000

$20,000,000,000

$30,000,000,000

$40,000,000,000

$50,000,000,000

HHS DHS VA Treasury Other

Obligations by fiscal year, in billions Obligations by fiscal year, in billions

MULTIPLE- AWARDCONTRACTS

TOTAL MAC DOLLARS AND SHARE OF MARKET INCREASING


About 42 percent of all federal IT dollars flowed through MACs in FY13

Services account for the majority of IT MAC dollars

2009 2010 2011 2012 2013 2014-YTD

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

IT services Hardware Software

Share of total IT MAC dollars, by fiscal year

2006 2007 2008 2009 2010 2011 2012 2013$0

$5,000,000,000

$10,000,000,000

$15,000,000,000

$20,000,000,000

$25,000,000,000

$30,000,000,000

0%

10%

20%

30%

40%

50%

60%

IT MAC spending, by fiscal year (in bil-lions)

Share of total IT contract spend-ing

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

GSA Schedule 70

NASA SEWP IV

Army ITES-2S

GSA Alliant

DHS EAGLE I

DISA ENCORE II

VA T4

HHS ESD

Air Force NETCENTS

GSA Alliant SB

GSA 8(a) STARS II

Navy SeaPort-e

Army ITES-2H

Treasury TIPSS-4

HHS CIO-SP2i

$0 $4,0

00,0

00,0

00


Dollars in billions

GSA Schedule 70

NASA SEWP IV

Army ITES-2S

GSA Alliant

DHS EAGLE I

DISA ENCORE II

VA T4

HHS ESD

Air Force NETCENTS

GSA Alliant SB

GSA 8(a) STARS II

Navy SeaPort-e

Army ITES-2H

Treasury TIPSS-4

HHS CIO-SP2i

$0 $4,0

00,0

00,0

00

DOD HHS DHS VA All other agencies

Dollars in billions


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

Army

HHS

Navy

DHS

DISA

VA

GSA

Air Force

Treasury

Justice

State

Interior

SSA

USSOC

Commerce


Dollars in billions

Army

HHS

Navy

DHS

DISA

VA

GSA

Air Force

Treasury

Justice

State

Interior

SSA

USSOC

Commerce

Non-schedule MACs Federal Supply Schedules GWACs

Dollars in billions


HOW SMALL BUSINESSIS FARING

MULTIPLE-AWARD CONTRACTS (MACS) HAVE LED SMALL-BUSINESS BOOM

2007 2008 2009 2010 2011 2012 2013 2014$0

$15,000,000,000

$30,000,000,000

$45,000,000,000

0%

15%

30%

45%

$26,218,000,467$29,776,403,049

$32,841,073,762$36,925,403,743$38,580,663,935$39,865,078,311

$37,141,425,261$39,133,695,140

SB MAC obligations, by fiscal year (in billions)

SB share of total MAC spending


SET-ASIDES HAVE PLAYED A CRITICAL ROLE IN ENSURING SMALL-BUSINESS SUCCESS

2007 2008 2009 2010 2011 2012 2013 2014

43% 44% 48% 53% 51% 52% 55% 58%

Set-asides No set-asides


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

2005 2006 2007 2008 2009 2010 2011 2012 2013

$75,000,227,064

$77,670,193,958

$83,274,871,888

$92,147,729,163

$96,833,802,400

$97,946,784,761$91,467,620,2

09$89,923,198,4

57$83,142,807,958

SB prime contract spending


2006 2007 2008 2009 2010 2011 2012 2013-15%

-10%

-5%

0%

5%

10%

15%

Small business Overall market

Percentage change in annual spending, by fiscal year

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

29%

27%

33%

34%

37%

14%

47%

15%

13%

63%

71%

73%

67%

66%

63%

86%

53%

85%

87%

37%

Small business Other than small business

Percentage of total contract spending, fiscal 2014

TECHNOLOGY SERVICES AND EQUIPMENT HAVE MORE THAN $20 BILLION IN 2014 SPENDING

Knowledge-based services

Facility-related services

Technology services

Technology equipment

Construction services

Research and development

Facilities supplies

Engines and power

Equipment-related services

Materials

$19,999,802,429

$17,330,899,025

$11,972,002,912

$8,857,551,176

$6,881,401,941

$5,657,468,096

$4,629,606,041

$2,887,379,237

$2,337,619,409

$2,311,841,079

▲10%

▲14%

▲15%

▲11%

▲11%

▲3%

▲8%

▲1%

▲1%

▼ 39%


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 ININFORMATIONTECHNOLOGY

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 takeoverFixed-Price

IT Outsourcing

IT Consulting

Transport Services

Software

Hardware

Secure Identity Services

2010 2011 2012 2013 2014

IT obligations in billions, by fiscal year

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% 938D399:

Other IT and Telecom

$21.46 ▼2% 718R425:

Support Professional - Engineering/Technical

$16.51 ▲6% 696D399:


$17.23 ▲9% 361D399:


$10.04 ▼3% 5005895: Miscellaneous

Communication Equipment

$1.52 ▲73% 1325810: Communications

Security Equipment and Components

FIXED-PRICE CONTRACTS DOMINATE I.T. PROCUREMENTS; T&M FALLING OUT OF FAVOR

T&M – Time and MaterialsSource: Bloomberg Government proprietary federal procurement database

Fixed-price orders on the riseContract type usage varies within IT subcategories

Hardware

Software

Transport Services

IT Outsourcing

Secure Identity Services

IT Consulting

0% 20% 40% 60% 80% 100%

Fixed-price Cost-based T&M Other

Share of IT obligations, fiscal 2014

2010 2011 2012 2013 20140%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Fixed-price Cost-based T&M Other

Share of IT obligations, by fiscal year

I.T. SPENDING HAS TRENDED AWAY FROM NON-SCHEDULE MACS


2010 2011 2012 2013 20140%

20%

40%

60%

80%

100%

Non-schedule MACs Schedule MACs GWACs

Share of IT MAC obligations, by fiscal year

and competition are trending upwardSpending

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.

[email protected] +1 202 416 3530

LinkedIn: Jesse Holler@JesseHoller

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