The document provides an overview of the TechAmerica Foundation's Vision Federal Market Forecast. It summarizes the research methodology, which included over 360 interviews and forecasts from 25 teams covering 10 years for defense and 5 years for civilian IT budgets. The macroeconomic and defense forecast anticipates modest growth in the DoD topline and notes potential disruptors. The federal IT forecast projects total IT spending to grow at a 2.6% CAGR from FY2015-2020. The civilian forecast anticipates 2.8% growth while the defense forecast shows 2.5% growth over the same period. Key challenges identified include ongoing budget pressure and the need for cost savings and transformation amid technology transitions.

1. Press Preview
October 27, 2014

2. Vision Federal Market Forecast Press Policy
TechAmericaFoundation.org
The Vision Forecast represents the collective work and
intellectual analysis of the Vision team. The presentations and
slides are the opinion of the TechAmerica Foundation Vision
process and do not represent the opinion of any individual
person or company on the team. Presenters merely convey the
collective outcome, and their presentations do not necessarily
reflect their personal or professional view nor that of their
companies.

3. Vision: 50 Years of Forecasting the Federal IT Market
Research Methodology Facts:
• Secured 360+ interviews with government
officials, industry executives and think tank
analysts
• Forecasts for 10 years in defense and 5 years in
civilian IT budgets
• 25 forecasting teams covering defense and
civilian agencies
• 99 participants representing 34 companies for
the defense IT forecast
• 232 participants representing 53 companies for
the civilian IT forecast
• Research process begins in April and culminates
with the Vision Conference in October
TechAmericaFoundation.org
Elizabeth Hyman
Executive VP, TechAmerica

4. Forecast Approach
5. Agency Team Review 4. Expert Interviews
4
2. Discretionary Forecast
1. Macroeconomic Forecast
Research Scenarios
3. Draft IT Forecast
6. Final Forecast

5. Forecast Coverage
5
IT
Budget
On-Book
Unclassified
Classified
Mission
Independent
Agencies
Judicial
Legislative

6. Study Teams
6
Defense Study Teams
Macro Economic /DoD
Topline
Cybersecurity Services and Support
C4ISR
DoD Services and
Agency Overview
Army Outlook Navy Outlook Air Force Outlook
Industry Outlook Aircraft Vehicles Shipbuilding
Space (Military) International Defense Missile Defense
Civilian Study Teams
Federal IT Budget Technology Outlook Dept. of Homeland
Security
Dept. of Justice
HHS Military Health System Veteran Affairs Dept. of Energy
Dept. of
Transportation
Dept. of State Dept. of Treasury Acquisition Outlook
NASA USDA

7. Macroeconomic & Defense Forecast Rich Ashooh, DoD Vision Chair

8. Economic and Security Outlook Impacted by New
Uncertainties
 U.S. and global growth outlook
– U.S. real GDP growth was 2.2% in 2013; could be closer to 2% in 2014
 Unemployment has dropped to 5.9%, but labor market participation is falling
– Worldwide growth is mixed and uneven
 Asia-Pac moderating, Europe slowing
 U.S. budget/deficit situation
 Bipartisan Budget Act (BBA) provides visibility through FY15
 Deficits have fallen in FY2014-15, but are projected to rise again
 Markets assessing the impact of ending Federal Reserve bond buying program,
timing of future interest rate increases
 Ongoing Middle East and Ukrainian conflicts are bringing uncertainty to the
global security and energy outlook
Expect slower global growth and a more complex security environment
8

9. Defense
16%
$608B
Social
Security
23%
$893B
Medicare
14%
$528B
Other
Mandatory
18%
$679B
Medicaid
9%
$337B
Defense
11%
$630B
Social Security
25%
Medicare $1,492B
15%
$857B
Medicaid
9%
$545B
Other
Mandatory
16%
$983B
Interest
14%
$804B
Long-Term Federal Budget Dynamics Have Not Changed
Mandatory and interest set to rise to 79% of federal outlays by FY24;
mandatory alone exceeds the entire FY15 US budget.
Outlays in Current Dollars
FY15 Mid-Session Review
$3.863 Trillion
OMB Projection for FY24
$5.914 Trillion
Non-Defense
15%
$568B
Source: Fiscal Year 2015, Mid-Session Review, Budget of the U.S. Government, July 2014, Table S-5, p.26
9

10. End Strength and Active Force Structure to Contract by 2025
Expect continued preference for capability over capacity;
potential exists for faster ES/force structure reductions in near- to mid-term.
0
1
2
3
1972 1977 1982 1987 1992 1997 2002 2007 2012
U.S. Military Active Duty End Strength
Forecast on Active Duty
End Strength (in thousands)
Component 2001 2015 2020 2025
Army 481 490 435 420
Marines 173 182 175 173
Navy 378 324 321 312
Air Force 354 315 312 310
Full-Time
NG/Reserve 65 77 72 68
Net Total 1,451 1,388 1,315 1,283
Source: US Department of Defense Fiscal Year 2015 Budget Request Overview, April 2014, p.A-2; FY2014 DoD Green Book, pp. 255-256.
Photo: U.S. Navy photo by Chief Photographer's Mate Johnny Bivera (RELEASED)
10

11. 2014 TechAmerica Forecast Drivers
 FY15 is turning out according to the Bi-partisan Budget Act playbook
 Expect continued reliance on CRs, no major $ shifts
 Incremental deals only, with new policy and resource directions to
come later
 OMB’s May guidance for FY16 sets a lower topline for future negotiations with
Congress (2% below FY15 projection)
 Expect discretionary to drop at least $125-150B more over FY16-19
 Defense growth path for FY16-17 will not survive
 Post-war drawdown ends with the full U.S.-Afghan withdrawal
 Efforts to raise only defense above BCA caps will not succeed
 Convergence of Presidential Budget and Budget Control Act adding
near-term predictability
 But industry needs to seriously account for out-year disruptors
Expect another round of cuts to discretionary, starting in FY16
11

12. Alternative Discretionary Forecasts: FY15-25
 Scenario #1: Sequestration “Red Line”
– Enforcement implemented in winter of 2015-16, going to 2025
 Scenario #2: TechAmerica Forecast
– FY16-17 incremental deals hold discretionary to inflation-only
– $235B below FY16-25 PB projection, plus $165B OCO savings
 Scenario #3: Economic Downturn/Recession
– Assumes major economic downturn beginning 2016-17
– More than $800B below FY16-25 PB projection
 Scenario #4: National Security Contingency
– Assumes external event drives major defense growth after 2017
– $130B above FY16-25 PB projection (increases begin in FY18)
TechAmerica forecast assumes modest movements between
the PB and BCA lines until policy choices crystalize after 2016.
Impact on
Spending
12

13. Narrower Budget Path is Emerging, but Disruptive
Scenarios are Possible
Further discretionary cuts will be front-loaded at the beginning
of the forecast as the trade space is still greatest in those years.
700
800
900
1,000
1,100
1,200
1,300
1,400
Current $B
Federal Budget Discretionary Budget Authority
(without Overseas Contingency Operations)
Revised BCA Caps
2014 TechAmerica Forecast
National Security Contingency
Economic Downturn/Recession
Trade Space Has Narrowed:
Sequestration Gap v. Budget Now in the
$50-70B range in FY16-18 (vice $91B)
Smaller
Gap by
FY24
Federal Discretionary
Budget History
FY14: $1012B
FY15: $1014B
13

14. DoD Topline Forecast
20-Year Perspective Including OCO (discretionary budget authority in $billions)
Topline drops from FY13-16 due to BCA, BBA and a declining OCO;
bottoms out in FY17 followed by roughly inflation-only gains
Federal Discretionary
Budget History
0
100
200
300
400
500
600
700
800
$8
FY17 post-war low: $538B
MILCON ,
Other
$63 RDT&E
$141
$250
$559
Current $B
$98
$73
$159
$267
$625
$115
$11
$630
FY15 PB + OMB projection (includes OCO
placeholder of $29.9B for FY16-21)
$69
$120
$179
$97
$15
$479
CAGR: FY05-15 FY15-25
Other & MILCON -6.09% 3.24%
O&M 3.40% 0.66%
MILPERS 1.63% 1.21%
RDT&E -0.91% 1.48%
Procurement 0.10% 1.61%
$691B – FY10
Wartime High
FY10 FY15
14

15. Investment Building Back from Sequestration, Drawdown
Investment is sustained at $150-160B level through FY17;
growth path resumes by FY 18 supporting F-35, SSBN-X, KC-46 and LRS
Federal Discretionary
Budget History
79 80 84
99 101 103 102 102
90 92 90 93 95 99 104 104 105 108 108 112 115
68 72
76
78 79 79 75 72
63 63 63 62 65
68 68 68 69 71 71 72 73
0
40
80
120
160
200
Procurement RDT&E CAGR: FY13-16 FY16-18 FY18-25
Investment 0.43% 3.80% 1.71%
Base Budget -Current $B
$147
$153
$188
2.08%
CAGR
2015-25
Peak
$182 FY13-16 investment trough
in the $150B range
FY23-24 procurement forecast is
$24-25B below OMB projection
15

16. Overseas Contingency Operations (OCO) Forecast
OCO declines gradually as our Afghan involvement comes to an end; TechAmerica
Foundation forecasts a gradual transfer of OCO costs to base budget.
Federal Discretionary
Budget History
15 22 20 20 22 26 24 20 17 12 15 10 6 1 1 0
15
53
62
38
72
94
93
87
108 110
87
62 66
47
33
18 14
2
5
7
19
24
51
67
35
34 31
17
10 6
6
3
1
5
0
50
100
150
200
17
91
73
166
116
76
82
115
162 159
146
20
64
86
Full Afghan withdrawal
deeply reduces OCO in
FY16-17, dropping to zero
in FY19. Post-FY17
costs begin migration
37
Actual Projection
Investment Operations & Maintenance Military Personnel/Other
Current $B
Iraq
surge
Afghan
surge
15
Combined GWOT & OCO costs will
exceed $1.5T after FY15
187
16

17. Summary of Macroeconomic & Defense Forecast
“Today we face the most diverse threats I’ve seen in my 50, now 51, years in
the intelligence business.” -- DNI James R. Clapper at the 9/11 Commission
10th Anniversary, July 22, 2014
 A modest recovery in the top-line of defense spending is expected in the
forecast period
 Macroeconomic and global factors present only downward pressure
 U.S. policy status quo creates limited opportunity for flexibility in budget trades
 Defense force structure and policy changes will impact out-year budgets
 Potential for economic and security disruptors is high…
 …although impact of each on defense runs counter
17

18. Federal IT Forecast Robert Haas, Vision Strategic Forecast Council

19. Top 3 Agency Issues: 2015-2020
19
Budget Pressure
• Budget Constraints
• Political Gridlock
• Macro Pressures
Drivers for Transformation
• Leadership
• Workforce
• Communication
Technology Transition
• Government Organization
• Enterprise IT Planning
• Disruptive Technologies
Vision Forecast is analyzed
through these three pillars

20. Total IT Market Forecast FY15-20
$80.7
$73.7
$84.0
$87.8
$77.0
$0
$20
$40
$60
$80
$100
'10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Total IT Budget ($B)
Fiscal Year
FY10-FY15 FY15-FY20
CAGR Current $ -1.8% 2.6%
CAGR Constant $ -3.4% 0.9%
Source: TechAmerica Analysis
Note: Excludes classified IT and quasi-governmental organizations
Bi-partisan Budget Act drives near-term IT market.
20
Current
Constant

21. $42.9
$43.4
$49.8
$46.7
$45.5
$0
$10
$20
$30
$40
$50
$60
'10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Civilian IT Budget ($B)
Fiscal Year
Civil IT Market Forecast FY15-FY20
FY10-FY15 FY15-FY20
CAGR Current $ 0.2% 2.8%
CAGR Constant $ -1.4% 0.9%
Source: TechAmerica Analysis
Note: Excludes mission IT
Civilian IT budget is flat in near term but grows with discretionary spending
21
Current
Constant

22. Civil IT Forecast Highlights
• Cost savings continues to be a high priority as spending is shifted
between different investment priorities
• LPTA: Budget constraints are forcing agencies to limit extras and
focus on IT as a commodity
• Innovation cannibalizes budget from legacy systems
• Budget uncertainty constraining technology migration
• Cybersecurity continues to challenge agencies
• Security issues slowing adoption of new technologies
Civilian agencies seek solutions that quickly cut costs and improve operations
22

23. $37.8 $30.3
$34.3
$41.1
$31.5
$0
$10
$20
$30
$40
$50
'10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Defense IT Budget ($B)
Fiscal Year
Defense IT Market Forecast FY15-FY20
FY10-FY15 FY15-FY20
CAGR Current $ -4.3% 2.5%
CAGR Constant $ -5.9% 0.8%
Source: TechAmerica Analysis
Note: Does not include classified IT or mission IT
DOD IT budget faces near-term pressure with inflation level increases at end of forecast period.
23
Current
Constant

24. DoD Forecast Highlights
• RFPs being released sooner than expected; option years cancelled
• Larger procurements appear to anticipate protests
• Consolidation driving alignment between DISA and Services
• LPTA still preferred by contracting offices despite issues; some attempts to
balance with program needs
• End strength reductions will continue to impact IT usage
• Joint Information Environment becoming more defined, but more process and
program details required
• Security contingency may drive some mission-related IT spending
• Open systems used to reduce software spending
• Cybersecurity more formalized as a mission; challenges remain
• Cloud, mobility and info sharing still face cultural and security issues
• Classified IT represents about $6.1B additional (DOD FY15 Request)
Expect increasing use of working capital funds with consolidation
24

25. Summary for Federal IT Forecast
1. Long-term economic challenges limit growth
2. Slow IT budget growth during forecast period
3. Opportunities still exist despite challenges
25