President Donald Trump wants to modernize the information technology systems of the federal government and signed an executive order to do just that. The initiative is in the early stages but there will likely be winners in this push including the likes of Microsoft (MSFT), International Business Machines (IBM) and Apple (AAPL) to name a few.
Earlier this week the White House confirmed the executive order that creates the American Technology Council. In the executive order Trump said “Americans deserve better digital services from their Government. To effectuate this policy, the Federal Government must transform and modernize its information technology and how it uses and delivers digital services.”
Under the order, around twenty technology Chief Executives will meet at the White House in early June to discuss ways to improve the Federal government’s information technology. The American Technology Council is being headed up by Microsoft’s former Chief Financial Officer Chris Liddell, who is currently the White House director of strategic initiatives. The White House hasn’t said which technology CEOs will take part in the meeting or which firms it will tap to overhaul its IT systems. But if the past is any indication, expect to see Microsoft, IBM and Apple front and center at the meetings. After all, ever since President Trump’s surprise victory, several technology CEOs have met with President Trump including those from Apple, Facebook, Alphabet (GOOGL), the parent company of Google, IBM, Microsoft and Tesla (TSLA).
Microsoft Has An Ally
With Microsoft’s former CFO Liddell heading up the initiative it’s likely the Redmond, Washington software behemoth will play a role, which could be a boon to Microsoft. After all Microsoft is increasingly moving beyond its legacy businesses and into the cloud where it is acting as a data hosting center for businesses and is creating cloud versions of its software. In Microsoft’s most recent quarterly earnings report, which it announced in late April, Azure, its hosting business (which competes with Amazon Web Services) saw revenue close to double and sales growth jump 93 percent. Shares of Microsoft have been climbing ever since it disclosed in October Azure had revenue growth of 116 percent. In April Microsoft acquired San Francisco software startup Deis, giving Microsoft’s Azure cloud service increasingly popular container technologies.
But it’s not only Microsoft that stands to benefit from this new executive order. IBM has a booming services business and could help the federal government integrate new technology while Google’s cloud services and software could also be used within the government. It’s not clear what if any role Tesla would play in this new initiative or if Amazon (AMZN) will be a part of it. Amazon’s Chief Executive Jeff Bezos was among the more outspoken and critical technology executives on President Trump with Bezos famously saying in a Tweet during the run up to the election he would gladly send Trump to outer space.
IT Spending At $80 Billion Each Year
The move on the part of the White House comes at a time when waste is alive and kicking within the federal government, particularly when it comes to information technology. Last year the U.S. Government Accountability Office issued a report in which it estimated the government spends more than $80 billion each year on information technology. And that’s with spending on IT declining by $7.3 billion over the course of the last seven years. As of 2015 the GAO found there were 7,000 or more separate investments in IT by the federal government alone. What’s more, that eye-opening $80 billion doesn’t include Defense Department IT systems and 58 executive branch agencies such as the Central Intelligence Agency. “Federal legacy IT investments are becoming increasingly obsolete: many use outdated software languages and hardware parts that are unsupported. Agencies reported using several systems that have components that are, in some cases, at least 50 years old. For example, the Department of Defense uses 8-inch floppy disks in a legacy system that coordinates the operational functions of the nation's nuclear forces,” the GAO wrote in its report.
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