At a Deltek conference a couple of years ago, former Defense Department chief information officer Teri Takai talked about her belief that sequestration would be a mechanism for federal innovation.

In the days when year-over-year budget increases were the norm, agency leaders could simply add initiatives to their technology wish list when new demands arose. Now, sacrifices must be made to assure some level of budgetary support for future innovation.

Contractors have a difficult job; they must split their attention between what agencies are buying now and what they will be buying in future.

Looking across the federal IT space, a major catalyst for next generation IT is likely to be the proliferation of data. The exponential growth in data is a problem now, but imagine the amount of federal data that will be collected and shared five years from now.

Agencies are likely to require more effective infrastructure to transport that data, and better tools to analyze it for operational and strategic decision-making.

The “data problem” is likely to drive investment in three emerging technology areas over the next few years: Sensor Technologies related to the Internet of Things (IoT), machine-to-machine (M2M) and cyber physical solutions (CPS); software-defined infrastructure (SDI); and predictive analytics and machine learning.

While these are not brand new technologies, they are positioned to become emerging markets within the federal IT space over the next few years.

The IoT, M2M and CPS are all flavors of sensor technologies that enable communication among embedded sensor devices or between those devices and the physical environment, which contributes to growing data creation.

SDI aims to give agencies a more efficient way to expand the bandwidth of networks and provide bigger communication “pipes” for transporting data.

Predictive analytics will provide agencies with more robust tools to glean insight from their data, with the eventual potential for machine-based systems to “learn” or improve upon their response capabilities without human intervention.

Compared to IoT, M2M, CPS and SDI, the federal predictive analytics market is both relatively mature and poised for growth. Analysis of predictive analytics solutions shows agency investment growing 70 percent from fiscal year 2013 to fiscal 2014.

Ultimately, the adoption of these emerging technologies could depend not only on agencies’ budgets, policy and workforce expertise, but also on contractors’ willingness and capacity to educate them on the benefits and risks.

And considering the inherent risk aversion within some federal agencies, strategies for risk mitigation couldn’t hurt either.

Contractors can look for evidence of agencies’ “innovation readiness.” Are agencies’ engaging in research in these areas? Are they investing in technologies that will support them, such as cloud computing, wireless network modernization, and other capabilities? Does the scope of next-generation contracts make room for future innovations?

It’s not always easy for contractors to know where to place their future bets; with some customer education they can help shape future demand.

Deniece Peterson is director of federal industry analysis for Herndon-based Deltek, which analyses the government contracting market, and can be found at www.deltek.com.

overall agency spending on predictive analytics

The contract obligations in 2014 exceeded previous years. The chart shows contract obligations, in millions, for fiscal years 2010 to 2014.

Contract obligations
2010  21.8
2011  43.2
2012  69.6
2013  63.9
2014  114.4