That's why spending to secure the Internet is a top priority if the government plans to get e-connected. "Part of what e-government is going to be is transferring personal information across the Internet," said Payton Smith, manager of federal market analysis at Input, a market resource for companies seeking to do business with the government. "People are still sensitive about transmitting personal information over the Internet ... The first step in enabling e-government applications is to make the networks secure."
Spending on cyber security has grown dramatically since 2001. According to Smith, federal spending stood at $1.3 billion in that fiscal year, prior to the terrorist attacks. That spending is earmarked in the White House budget to be $4.7 billion in fiscal 2004, up from $4.2 billion in fiscal 2003.
Now, it's not easy to predict a year out, much less five years.
But according to Smith's crystal ball, federal government spending on information technology and services is forecast to grow at a compounded annual rate of 8.5 percent.
Spending on services and technology across all federal agencies could reach $68.2 billion in 2008 from $45.4 billion in fiscal year 2003. Spending on cyber security is forecast to grow at a compounded annual growth rate of 7 percent to $5.9 billion in 2008.
Even if that growth rate is way off -- as ultimately most predictions tend to be -- spending from the government still looks relatively upbeat. Of course, that's not too difficult these days.
Fed spending on tech is growing faster than the U.S. economy, spending on personal computers and telecom. The U.S. economy is expected (by some estimates) to grow by 3 percent this year. On a global basis, spending on telecom capital equipment is expected to fall 6 percent this year. Growth in personal computer units is expected to grow by 7 to 8 percent this year, according to an earlier Gartner survey. But PC revenue is only expected to grow by 2 to 3 percent.
The areas that are expected to receive the most attention are homeland security and e-government initiatives. Federal divisions with the greatest spending include Department of Defense, Homeland Security, Department of Transportation, Department of Energy and Department of Treasury. These five departments will represent nearly 70 percent of federal spending in tech services through fiscal 2008.
Of the spending on cyber security, $900 million is still earmarked over five years to promote cyber security research and development, Howard Schmidt, the government's cyber security adviser and formerly Microsoft's chief security officer, said Tuesday in an interview with CBS.MarketWatch.com.
See interview with Schmidt and TechNet CEO Rick White on Yahoo's (YHOO) Yahoo Platinum. Click here.
Schmidt, who attended the RSA Security (RSAS) 2003 conference in San Francisco, said the spending has been authorized, but not yet appropriated. The funding for cyber security was announced last November. Smith joined TechNet CEO Rick White and other executives to announce that the auditing business and other major corporations are building security awareness within the private sector. See full story.
Government reliance
Government spending already accounts for a large percentage of sales in the securities industry, according to RBC Capital Markets' estimates from the fall of last year.
Internet Security Systems (ISSX) generates about 20 to 25 percent of its license sales from the government sector. VeriSign (VRSN) generates about 8 to 10 percent; Symantec (SYMC) generates about 10 to 20 percent; Check Point (CHKP) generates about 5 to 8 percent. Network Associates (NET) relies on the government for about 8 to 12 percent of sales while Websense (WBSN: news, chart, profile) generates about 6 to 8 percent of sales from the government. Netegrity generates 5 to 12 percent, and WatchGuard generates about 5 percent of revenue from the government.
Quelle: CBS MarketWarch
