State, Local Gov't IT Spending To Reach $72 Billion

IT spending by state and local government is expected to grow 44 percent to $72 billion in the next five years, according to Reston, Va.-based research firm Input, with more than 80 percent of that total falling in the laps of private-sector companies as non-core government competencies are increasingly outsourced.

Input expects conservative increases in spending this year, with growth accelerating in 2007 and 2008 as stalled projects are renewed and pending workforce shortage force the outsourcing of more IT processes. More aggressive efforts toward IT centralization and consolidation of operations will also encourage spending.

So where will the dollars be spent? According to Input, VARs able to assist state and local governments with financial-system modernization and management, intelligent transportations systems, integrated justice systems and interoperable communications that enhance homeland security will land the most contracts.

In addition, as the federal government drives health IT initiatives and Medicare continues to eat up the largest portion of state and local budgets, solution providers able to improve health-system efficiencies and integration will be in high demand. That, combined with an increasing focus on interoperability in law enforcement and border patrol, will drive demand for telecommunications and professional services.