Comment Tesla reportedly decided not to upgrade its SAP’s enterprise software a decade ago, opting to build its own system instead. Now, with Elon Musk heading up the Trump-blessed US Department of Government Efficiency (DOGE), his cost-cutting mindset could have major implications for federal IT spending – and the big tech vendors cashing in on government contracts.
If he thought SAP was too bloated and overpriced, what does that mean for big-spending government departments?
First in the line of fire has been USAID, which Musk said he had put through a “wood chipper” last Sunday.
While the whole federal agency dedicated to distributing billions of dollars in aid around the world may not totally disappear, it may well be massively cut and merge with the State Department, though reports conflict on the details.
Legal challenges have added further uncertainty. On Friday, a federal judge put at least part of those plans on hold, temporarily pausing the Trump administration from placing thousands of USAID workers on administrative leave.
Nonetheless, this raises questions about USAID’s tech contracts, how they will be dealt with, and what the fallout will be during any dismantlement and after. Its major partner is NTT Data, the Japanese tech services giant, which runs a contract worth up to $469.7 million for custom computer programming services.
Tech consultancy Accenture and CRM software vendor Salesforce are among the tech suppliers cashing in on USAID’s IT budget, too.
NTT Data declined to comment on how changes at USAID may affect its work with them, wood chipper or no wood chipper.
Regardless of political stance, USAID is a relatively small federal department. If DOGE really wants to get a hold of US government tech spending, it needs to think bigger – which means, apart from the potentially daunting technical aspect of cutting down services, the team will run into certain powerful forces that presumably would rather keep millions of dollars in IT deals rolling in.
According to President Trump, the administration has the final say on whether to proceed with cuts recommended by DOGE, though so far the commander-in-chief has backed Musk, whose companies continue to hold contracts and other dealings and interactions with the very government the SpaceX billionaire is now rifling through.
The largest federal government department is Health and Human Services, with a total budget of $1.7 trillion proposed for 2025 – most of it allocated to Medicare and Medicaid, which DOGE has been poking around this week already.
Big-ticket tech suppliers include Peraton, a privately held US national security and technology company, which has a $1.2 billion Department of Health and Human Services contract for data processing and hosting.
Meanwhile, General Dynamics has a $879.1 million deal for custom computer programming services, and Accenture has an up to $805 million contract for systems design services.
Another famously big spender in the federal government is the Department of Defense, with a total budget of $850 billion for fiscal year 2025 – another part of Uncle Sam DOGE has started investigating along with the Dept of Education.
The Pentagon relies heavily on Oracle for its ERP and finance systems, and has a string of contracts with Big Red, including this one for $338 million.
Oracle resellers and systems integration partners also feature prominently on the DoD’s tech spending list, including Mythics LLC, with a $307.5 million deal, and DLT Solutions (part of TD Synnex) with deals worth $279.3 million, $238 million and $132 million.
- Federal judge tightens DOGE leash over critical Treasury payment system access
- Democrats demand to know WTF is up with that DOGE server on OPM’s network
- DOGE geek with Treasury payment system access now quits amid racist tweet claims
- Dems want answers on national security risks posed by hiring freeze, DOGE probes
- Musk’s move fast and break things mantra won’t work in US.gov
Nonetheless, it remains to be seen how much of DOGE’s plan is to create a barrage of noise and attacks on Trump and Musk’s political and commercial opponents, and how much is really planned to reel in government spending. After all, the systems and relationships are very entrenched and creating alternatives may be more challenging than a migration at a relatively small automaker. Yes, despite Tesla’s market valuation, it doesn’t rank in the top 10 automotive manufacturers in terms of production.
Meanwhile, some of the IT suppliers have friends in high places. Oracle co-founder and CTO Larry Ellison, a proud Republican, stood alongside Trump during the launch of the proposed $500 billion investment in AI infrastructure.
Another Oracle project at the Department of Veterans Affairs just rebooted a $330 million project, despite concerns over the rollout cost and safety of its Cerner patient record system under the original $9.99 billion deal. We cannot imagine Oracle standing by and letting these contracts be whittled down without some say in it.
Trump’s pick for Veterans Affairs Secretary Doug Collins said during a Senate nomination hearing that the program had gone on for “too many years and cost too many billions of dollars without finding a solution.” He said it would be “one of the very first priorities, if confirmed, is to get in and figure out why and put this on a bigger timeframe to get this medical health records issue solved.”
Going after federal government tech spending might be more difficult than it seems, therefore, but there is also more to Tesla’s ERP system.
Despite claims that a team of 250 Tesla staffers built a new ERP system in four months, other reports suggest it built some manufacturing software that was bolted on the side of a Microsoft Dynamics finance system.
Like many tech legends, the truth is far less exciting than the myth. The same may be true of DOGE’s efforts to take on federal agency’s big tech spending. ®
Speaking of DOGE… The team was this week blocked from accessing the US Dept of Labor’s data in a win for unions. A 19-year-old member of DOGE was reportedly fired from an internship after he was accused of sharing information with a competitor. And it’s not just inexperienced engineers in the squad; it also has lawyers with elite establishment credentials.
There are various reports of the crew, with the White House’s blessing, accessing highly sensitive systems, some involving personal data and classified materials, at the Office of Personnel Management (OPM), the United States Agency for International Development (USAID), the General Services Administration, the Centers for Medicare and Medicaid Services, and the Dept of Education, at least.
This has included, it’s said, analyzing sensitive Dept of Education data with AI tools in Microsoft’s Azure cloud. All with the stated intention of rooting out inefficiencies and things to cut, aka stuff Musk doesn’t find appropriate.
