State of the States: Our Annual Guide To State Government Technology Spending and Trends

Partly for that reason, states will invest more in software as they seek new ways to leverage existing technology and streamline processes across agencies. They want to standardize e-mail, human resources, payroll systems and incorporate the necessary security software to protect data as it moves across the network.

Such efforts will be gradual, says Randy Lee, vice president of government business, North America, for ASAP Software. The Buffalo Grove, Ill.-based solution provider touts software contracts with 34 states, and won the 2007 State Government Solution Provider of the Year award from GovernmentVAR. "Take document management," he says. "The agencies that have a need for archiving will be early adopters, then they'll move that standard across agencies as it becomes successful and proves to be scalable."

Input predicts an increase in total contracted spending on software by state and local governments from $6.1 billion to $8.2 billion over the next five years. Along with back-office processes, that will come from growing demand for vertical solutions. Input predicts the health-care market to grow from $6.9 billion in 2007 to $9.7 billion in 2012, homeland security from $1.4 billion to $1.9 billion, justice and public safety from $2.7 billion to $3.9 billion, and social services from $4.1 billion to $5.8 billion.

"The direction that customers are going couldn't be better from a total solutions perspective," says Bill Hartwell, vice president of government business at Motorola. "In the wireless market, devices will get pulled along by the applications and capabilities of a solution provider to scale and implement on a broad basis."

Creative Buying Models

The constant struggle to get funds earmarked for IT leaves most states looking for new, economical ways to procure solutions. Often that means outsourcing, financing options that incorporate not only the hardware, but the full solution, and software as a service.

In the case of the latter, Input's Dixon expects more demand for packaged disaster-recovery solutions that don't involve complex rollouts or major investments, for example, "telework in a box," where states could call upon a solution provider to provide bare-bones network access that lets employees keep working in a state of emergency.

"There has to be more of a hot site/cold site mentality to some of these offerings, or else states just won't invest at all," Dixon says. "VARs especially are in a good position to offer the happy medium—a temporary alternative to owning capabilities."