$61.5 Billion In State and Local Government Tech Spending

Reston, Virginia (PRESS RELEASE – August 9, 2010) – The demand for vendor-furnished information systems and professional services will increase from $52.8 billion in 2010 to 61.5 billion in 2015, according to State and Local Information Technology Market, 2010-2015, a new report from INPUT. This annual forecast illustrates that IT spending will grow at a compound annual growth rate (CAGR) of 3.1 percent, which brings in a fresh infusion of $8.7 billion into the State and Local market.

As cities and counties try to turn the corner on the recession, contractors will find technology opportunities throughout the forecast period. “While these estimates are not as high as the ones from three years ago, there is definitely growth in the market,” said Chris Dixon, manager, State and Local Industry Analysis at INPUT. “Governments will continue to look to technology to help address their goals and overcome challenges, especially IT solutions that help cushion costs and increase productivity.”

State and local governments are also gearing up for the November elections, which will likely impact budgets: “There is a natural turnover of contracts and aging legacy systems that will require investments; at the same time, a new batch of governors will probably make changes and look for ways to save money by decreasing staff and readjusting pension obligations,” said Dixon. “These cost savings allow agencies to reallocate some of their funds to technology.” There are also several verticals that are poised to outperform the 3.1 percent CAGR, namely:

  • Justice and public safety
  • Transportation
  • Budget and public finance
  • Health care
  • Education
  • Economic development

The report utilizes a sample of the budget requests of governors, mayors, and county commissions, coupled with comprehensive research, expert knowledge of state and local IT procurement processes, and long-range plans to forecast spending trends for the next five years. It focuses on technology, acquisition processes, and regulations that shape the size and direction of the market, which include:

  • Gradual stabilization of state and local revenue streams
  • A continued focus on IT systems serving programs that are subsidized by the federal government via annual grants and occasional stimulus funding
  • Implementation of technology to dramatically bend the cost curves in the education (primary/secondary), general government services, and justice/public safety verticals
  • Increased reliance on federal funding for IT systems providing operational support to federally-funded/state-operated programs in the health care and social services verticals
  • Investments driven by federal demands for compliance in the areas of contract performance, transparency, reporting, and accountability

Certain IT segments, such as outsourcing and software,  are also expected to grow more than others.. “Governments are making the most out of their existing hardware products so they’re using those savings for professional services and software solutions, especially those with innovative licensing options,” said Dixon. He also addressed the fact that most contractors are playing the waiting game when it comes to pursuing state and local opportunities: “State and local officials always remember which vendors helped them out when times were tough,” he said. “If contractors want to get the lion’s share of contracts when the economy improves, they should work with these agencies today.”

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