(This blog post is part of a multi-week series reviewing data and trends from GSA’s IT acquisition vehicles for FY15. Read previous posts at http://gsablogs.gsa.gov/technology/
In FY15, federal agencies purchased $1.62 billion in network and telecommunication services under GSA’s Networx program. This reflects a 6.3% increase over FY14. Much of the increase was driven by demand for bandwidth, which more than offset declines in purchasing of legacy services like long distance voice, toll-free services, and other obsolete data-oriented services.
The source of the purchasing numbers is Networx billing data. On behalf of federal agencies, GSA operates a billing and inventory system for telecommunications services. These systems allow us to see purchase and price trends for every federal agency as well as the program as a whole.
Overall in FY15, more than 120 federal agencies used the Networx program, which consists of the Networx Universal and Network Enterprise contracts.
Beyond purchasing, a significant milestone in FY15 was the decision to extend the Networx contracts to four of the five Networx suppliers to FY20. This extension gives federal agencies time to transition to the next generation network and telecommunications acquisition – Enterprise Infrastructure Solutions – which is currently an active solicitation. And, the Networx contracting and program offices are using this extension period to continue ensuring our agencies pay not only fair and reasonable prices but better than commercial (in most cases) for services.
Annual Networx Buying Trends
As in FY14, the two largest in-demand core services on Networx continued to be Network-Based Internet Protocol Virtual Private Network (NBIPVPN) and Managed Network Services (MNS), making up 48% and nearly 12% respectively of Networx purchases. NBIPVPN is simply bandwidth, designed for use within an enterprise.
Demand for these two services continues to grow. Government agencies increased purchasing of bandwidth by 12% and managed network services by 3% in FY15 over FY14. But, the growth trend on these two services tapered from past years. In FY14, the year-over-year growth trends for these two services were 17% for both services.
The real interest around bandwidth purchasing is a trend away from the digital signal hierarchy (DS-1, DS-3) towards Ethernet services. The most common circuit in the federal inventory is the DS-1. However, the number of these low bandwidth circuits dropped by 5.9% in FY15 and for the past five years has a negative compound annual growth rate of 4.1%. Conversely, the growth rate associated with 100MBps Ethernet transport circuits grew by nearly 100% in FY15 compared to FY14. We believe this trend will continue and are acting proactively to ensure our pricing is fair and reasonable given the buying power of the federal government.
Evolving Security Needs
One of the bigger growth areas on Networx was security. Network security is a fundamental component of information technology security. The Managed Trusted Internet Protocol Services (MTIPS) grew at nearly 36% from FY14 to FY15 and the five-year compound annual growth rate is 209%.
MTIPS is a unique service to the government and combines bandwidth and security services. GSA continues to have productive working relationships in the federal IT community to enhance MTIPS. And, we expect demand for MTIPS to continue to grow faster than the rate of Networx as a whole.
Security services, like MTIPS, constantly evolve. They will continue to do so on Networx and on Enterprise Infrastructure Solutions (EIS), which is the follow-on contract vehicle for Networx, the Regional Local Service Agreements (LSAs), and other current contracts. EIS will have a suite of advanced security services in addition to MTIPS.
FY14 to FY15 year-over-year purchase increases are shown below for some of Networx core services:
|Highlights of Networx Purchases by Service from FY14 through FY15||Percentage Growth (FY14 to FY15)||Percentage of Networx Purchases|
|Network-Based Internet Protocol Virtual Private Network Service||12.1%||48.4%|
|Managed Network Services||3.2%||11.6%|
|Toll Free Services||-7.5%||7.5%|
|Managed Trusted Internet Protocol Services (MTIPS)||35.9%||1.7%|
Delivering Cost Savings
One of the missions of GSA is to use the purchasing power of government to drive down prices and reduce costs for agencies. GSA closely and continually evaluates how Networx is meeting this mission, especially around the area of pricing. In FY15, the Networx program saved taxpayers and agency users approximately $670 million on telecommunications, compared to best commercial prices.
GSA calculates savings by keeping and using detailed Networx data on both the services agencies purchase and agency usage volume. Third-party market research allows us to compare best commercial rates for these services to Networx pricing. If you are interested in seeing current year pricing by service on Networx, please visit our Networx Unit Pricer.
Going forward, we will continue to closely evaluate prices paid for services. Through effective data collection, we closely track purchasing by supplier, by service, and by agency. And, based on this data and the subsequent analysis, we will act on opportunities for savings through effective supplier management.
This practice will continue throughout the life of Networx as well as subsequent acquisitions within the Network Services Program.
Please follow us on Twitter @GSA_ITS to join the government IT and networks conversation.