State of States

By the time you read this, 36 statehouse contests will have been decided. If the pundits were right, the midterm elections should have produced either a change in leadership or poll results that will prompt surviving governors to modify their agendas. As a result, most state chief information officers and other decision-makers agree that few new IT dollars will be spent during the next four to six months.

Of course, that's not what solution providers want to hear, but it's not entirely bad news.

This transition period is giving solution providers time to get all their ducks in a row for the eventual flurry of state IT spending. Research firm Input predicts that IT spending in state and local government will reach more than $60 billion in 2008 and about $73 billion in 2011. Of that, $50 billion will be contracted to the private sector in 2008, $62 billion in 2011.

Two areas that will carry significant opportunity for the channel are public safety, which Input predicts will grow 12 percent to $3.4 billion in the next five years, and health care, which is expected to grow 10 percent in that same time frame, from $7.6 billion to $12.2 billion.

The most significant sector growth will happen in telecommunications (from 19 percent of the budget in 2006 to 23 percent in 2011) and services (from 23 percent in 2006 to 30 percent in 2011). Software products will stay at about 9 percent of the total IT budget, while computer hardware is expected to drop from 16 percent to 14 percent.

"[The big challenge] is educating our legislature about the role of IT in state government," says Michigan CIO Teri Takai. The state's budget for 2006 is $360 million. "It's difficult to maintain the networking and education effort necessary to keep legislators on our side and in support of IT, especially with continuous turnover. Obviously, with new administrations and new ideas, a new strategic direction can be set for IT. To set that strategic direction, the new administrations need to understand the current initiatives and how and why they were started."

For a shot at the state dollars spent down the road, the public-sector channel needs to understand the same thing. There are a few givens that solution providers can count on for the shorter term. The large IT consolidation efforts will likely continue unimpeded. Modernization that improves efficiency and cuts costs will receive priority--even if it's slightly delayed by the elections. And solutions that provide citizens with services and, subsequently, earn kudos for government will remain popular.

According to Input, the specific state and local IT projects that will move forward will be those that generate revenue, improve system performance, increase program efficiency and effectiveness, enhance cost management, move the integration of systems forward, or augment infrastructure integrity and security. And of course, mandates handed down from Capitol Hill will drive initiatives forward, whether state government likes it or not.

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