'We definitely scaled back our expectations over the next five years, given the budget-request revision on March 6,' said James Krouse, acting director for federal market analysis at Input. 'It showed only a 0.5 percent growth from the fiscal 2006 enacted budget to the 2007 budget request. It was very flat in terms of what we've seen historically over the last three to five years, where the growth has averaged between 5 percent and 6 percent. So our expectations of [IT spending] are quite a bit more bearish.'

Analysts are divided over what is driving the decline in spending, he said.

Some feel that efforts by the Office of Management and Budget to cut costs, boost efficiencies and improve management are showing returns, Krouse said. Others argue that the federal government has historically overspent in IT, which stands out even more given conservative spending by agencies in other areas.

'[Agencies] have, with the exception of 2004, overspent every year over the last 10 years plus,' Krouse said. 'So here we're looking at a very conservative budget request out of the box, and the expectation is either the cost savings are going to materialize, the efficiencies are going to materialize, or we're going to expect some significant overspends in the forms of supplemental requests to the budget.'

Homeland security will get a renewed focus, but with spending aimed at different priorities such as natural disaster relief and preparation. The health IT market will also receive a boost, with spending projected to rise steadily over the next five years, according to Input.