9/11 five years later: tech spending slowing down

Contractors who have been used to plentiful IT spending seeing projects slowing down, but just a bit.
Written by Richard Koman, Contributor

On the fifth anniversary of 9/11, government spending on technology has started to dry up for the first time since that fateful day. While contractors are not yet panicking, the slowdown is real and noticeable, say The Washington Post.

The effects have so far been mild. Companies that in the past five years had experienced booming demand and grown accustomed to record profits nearly every quarter and double-digit annual growth are having to settle this year for numbers that are closer to still-robust historical averages. Stock prices have come off their peaks but remain above where they were a year or two ago. ...

But the slowdown reflects a significant shift in an industry that since 2001 has led an expansion of the Washington area economy, as companies swooped in to fill the government's appetite for technology that could help ward off another attack. Many firms boosted their bottom lines in the process and added thousands of jobs. They are now having to rein in their ambitions and look beyond the federal government as information technology budgets flatten.

Blame it on Iraq.

There is disagreement over just how long the slowdown will last, but the underlying reason does not seem to be going away: Spending to fight the wars in Iraq and Afghanistan is eating up such a large portion of the budget that the government has had to postpone or cut back many planned technology upgrades.

Civil programs have been especially hard hit, but military and homeland security technology modernizations have also been shelved.

But technology and the military go together like lox and cream cheese - and venture capitalists investing in contractors aren't too worried about the tech slow-down.

Jack Biddle, a partner in the Novak Biddle Venture Partners, said venture capital spending may decline a bit in the next few years, "but the fact that there's a war going on means that the government is very aggressive in looking at technologies and products that can help the country in the war. And a lot of these products have potential commercial value."
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