Reading The Tea Leaves

As the world's largest provider of consumer IT goods and services, the U.S. public sector follows myriad priorities to fulfill its resource needs. While there are some universal trends, each segment of the public sector--federal, state and local, education and health care--has unique needs that shape its IT agenda. GovernmentVAR has read the tea leaves and divined the trends that will determine the direction of the government IT market and channel in the coming year.

NEXT: Federal Government Trends

FEDERAL TRENDS

Combat Zones' New Address
The military's growing reliance on the Internet for real-time communications is straining the Department of Defense's available number of IP addresses. The DoD mandated a full conversion of its global IT network to IPv6 by 2008, which will greatly expand its address space and improve security and network performance. The Office of Management and Budget (OMB) has issued a similar mandate for all federal agencies. As the deadline approaches, expect to see conversion opportunities across the federal government.

Break Out The 'COTS'
If IT advocate Rep. Tom Davis (R-Va.) has his way, commercial off-the-shelf (COTS) software will be exempt from the Trade Agreements Act (TAA). The law requires agencies to buy only software that's produced in approved countries, which, in theory, reduces the risk of malicious code or spyware being introduced to government networks. Davis and others say these restrictions make it both too difficult and too expensive for agencies to buy the software they need. Watch out for new partnership opportunities to arise if Davis gets his way.

Pressure To Perform
No more free lunches inside the Beltway, so to speak. The feds are slowly letting go of their old directive method of procurement, adopting performance-based contracting. This means integrators are given a free hand to do their work, but only get paid if they deliver the specified outcome. As Rick Marcotte, president and CEO of Herndon, Va.-based DLT Solutions, says, "achievement of the represented outcomes is no longer discretionary."

Calling Into Work
Government employees are catching the telecommuting wave. Agencies are investing in technologies that allow workers to connect securely to the office network from the comfort of home. Think VoIP and VPNs. Spikes in gas and commuting costs will likely fuel interests in telecommuting, especially for the thousands of government workers living in Washington's expensive outlying suburbs. It's all good news for integrators that can deliver efficient telecommuting tools.

The GSA Sidestep
Many government solution providers are learning that they can sidestep the General Services Administration (GSA) through indefinite delivery/indefinite quantity (ID/IQ) contracts and blanket purchase agreements. Two joint contracting vehicles that have received a lot of attention are the Department of Homeland Security's EAGLE and FirstSource programs, which incorporate multiple ID/IQ contracts for IT services and commodity needs. Expect to see more ID/IQ initiatives in the coming year.

Who's The New Guy? Part I
Federal agencies have long in-sourced help from IT contractors, but expect to see more new faces around the data center. Retirements among the current crop of government IT pros and the inability of government to compete with the public sector on wages and benefits will force agencies to outsource more of their key IT operations. Big integrators will benefit, but so will smaller partners who will be required to help cover the need for IT staff.

Shielding The Borders
One of the biggest hot-button domestic issues to grab the Bush administration's attention is border security and illegal immigration. The federal government has already diverted IT funds to help cover security patrols along the Mexican border. Washington will spend billions in the coming year on electronic surveillance and monitoring systems, opening new opportunities for solution providers that can build, manage and maintain the systems, and support border security along the nation's frontiers and ports of entry.

Small Keeps Getting Bigger
Expect set-asides for small and disadvantaged businesses to keep increasing. According to research firm Input, the feds earmarked more than $30 billion in small-business contracts in 2006. While these programs have been criticized because large integrators capture them by partnering with smaller contractors, the mood inside the Beltway is to continue allotting money to help promote small-business work. Expect more oversight, though, as procurement officers scrutinize who actually holds the contract.

Getting In Line
The list of IT priorities mandated by the OMB keeps getting longer. The Lines of Business (LOB) initiative started with five management areas in the expansion of e-government: case management, financial management, grants management and HR management. Security was added later. Under the president's 2007 proposed budget, agencies have to address the IT needs of three additional LOB--budget formation and execution, geospatial and infrastructure. With each new mandate comes channel opportunities.

NEXT: State and Local Government Trends

STATE AND LOCAL GOVERNMENT

Pay As You Go
State and local governments are forgoing the hassle of software procurement and licensing, opting for VAR-provided software as a service, or SaS. IBM pioneered government SaS with its On-Demand Workplace for Citizen Service, Government Case Work, Healthcare Administration and Healthcare Clinicians. State government's desire to take advantage of customized applications and e-government capabilities without exhausting resources with support and maintenance is also driving adoption.

Servicing The Masses
Many state and local governments are finding that Service Oriented Architecture (SOA) is one way of extending the effectiveness and efficiency of IT infrastructures. Chicago, for example, enjoyed a 20 percent increase in parking-permit and citation revenue by building an SOA payment engine used by multiple city agencies. The National Association of State CIOs (NASCIO) says to expect to see similar implementations in the coming year.

Unwanted Legacies
While state and local governments have long complained about legacy technology, they're finally making moves to update their infrastructures. California tapped BearingPoint to deploy a replacement for its 30-year-old payroll and personnel system. Oregon is consolidating the information infrastructures of 12 of the state's largest agencies to deliver shared services. Stay tuned for many more legacy-replacement projects.

Remember Katrina
Louisiana courts had to freeze-dry documents to restore trial records soaked by Hurricane Katrina. It was a hard lesson in the need for good disaster recovery, and many state governments have taken notice. State and local governments are spending big on backup storage and disaster-recovery solutions to guard against loss resulting from natural or man-made disasters.

Open About Open Source
Many states are following the lead of Massachusetts in the greater adoption of open-source solutions. The Bay State reports gaining more flexibility from its open-source implementations. Besides, those hardy New Englanders are also leading the charge against proprietary document standards. State and local agencies are willing to give customized open-source applications a try, provided they meet the requirements.

Getting On Schedule
States are slowly warming to the idea of purchasing off the GSA Schedule. While federal agencies are moving away from the standard, states are increasingly using the Schedule as a means for multistate cooperative purchasing. Now more than 30 states--Florida and Georgia most recently joined the ranks--have authorized purchasing through the federal standard, and some local governments are following suit as well.

The Power Of The Storefront
State and local governments are increasingly looking to the retail industry for customer-service best practices. People seeking a rifle permit in New Jersey and Florida can often head to Wal-Mart or a locally owned sporting-goods store for service. That means interesting opportunities for solution providers to provide customer resource management (CRM) and point-of-sale solutions to accommodate retail-like government offices.

Spirit Of The Radio
New York and Washington, D.C., may succeed where Congress is failing in creating a reliable first-responder communications network. Capitol Hill continues to debate the finer points of standard for secure wireless communications for emergency services. Washington isn't waiting, though; its Wireless Accelerated Responder Network (WARN) is the nation's first citywide broadband wireless public-safety network, enabling wireless interconnection of local and federal public-safety mobile devices. The Big Apple's Geospatially-Aware Urban Approaches for Responding to Disasters (GUARD) may serve as a model for a nationwide standard. These experimental programs and, ultimately, the final standard will create tremendous opportunities for integrators.

Hot In The City
From New York and Philadelphia to Chicago and Portland, cities across the country are establishing Wi-Fi networks that provide wireless high-speed broadband Internet service for all citizens. While industry analysts struggle to decide whether these initiatives are actually in government's best interest, and what this all means for data security, government is scrambling to offer the full networking solutions and maintenance services that municipalities demand.

Dialing For Services
Move over, 911; the new hot government dial-code is 311. Municipalities across the country are rolling out the quick-dial government information line to ease the number of non-emergency calls to 911. The Federal Communications Commission recently mandated that all Internet-telephony services support the new standard, which will require extensive modifications to existing networks. There are also calls for creating other X-11 numbers for quick informational services. Anyone hear opportunity calling?

Who's The New Guy? Part II
The pending wave of retirement won't just affect the federal government. State and local agencies are bracing for an exodus in their IT ranks. Government analysts are predicting an uptick in outsourced application management, platform operations and desktop services. State-level outsourcing will reach $18 billion annually by 2010, according to Input.

Don't Fear ERP
States including Ohio, Washington, Maine, Tennessee and New York see enterprise-resource planning (ERP) as a means of reducing the cost of everything from personnel support to tax collections to accounts payable. The concern of some states over the expenses associated with such implementations has been allayed as budgets improve, leading many to recognize ERP as a money-saver and a way to standardize across agencies.

NEXT: Education Trends

EDUCATION

Goodbye To Blackboards
Teachers are making greater use of wide-screen plasma monitors and LCDs for their PowerPoint-driven lessons. Modern teaching systems also include stereo surround-sound, microphones, wireless networking and collaboration software. As school systems modernize their infrastructures, they'll be adding more digital capabilities.

One-Stop Shopping
Gone are the days when individual schools determined their own IT needs; rather, districts are coming together and centralizing technology purchases to reduce costs and expand resources. Arizona's Department of Education, for example, uses the state's Enterprise Procurement System, or EPS, for all procurements of more than $50,000.

Apple For Teachers
School systems, desirous of a standard computing platform, were often forced to buy both platforms: Macs for their educational benefits and Wintel systems for their broad application support. Now, with Intel processors in Macs, school systems can finally have the best of both worlds. Unfortunately for the channel, a teacher's Mac often comes direct from Apple. But there's always opportunity to sell Windows-compatible applications and support services.

Playing With The Big Boys
The centralization of procurement brings with it a rapid domino effect, as contracts are increasingly handled by large direct-market resellers rather than small neighborhood solution providers. What does that mean for small VARs? That they have to model their strategy for targeting the education market after the strategy for landing federal small-business opportunities. They have to encourage partnerships by offering niche capabilities and supplemental services, and lead with established customer relationships.

Cooperative Help
Education Service Agencies (ESAs) have long enabled bulk purchasing for school districts on a local and, increasingly, regional level. While ESAs offer cost savings to participating school districts, they can't always provide IT support and integration services, which is creating greater opportunities for solution providers in the education arena.

A Lesson In Reimbursements
Solution providers trying to cash in on connecting schools and classrooms to the Internet are aware of the nightmares of getting reimbursements under the federal E-Rate program. Yes, the bureaucracy is difficult to navigate, but there's still a lot of money--more than $2.25 billion for school and library projects, to be precise. What does that mean for the channel? That solution providers learning to navigate the E-Rate program could reap great rewards.

Where Kids Are Surfing
School networks have the same security concerns as any enterprise, with the added challenge of ensuring that children aren't exposed to inappropriate material or online predators. School districts are investing more in Web and content filtering, identity management, centralized network-management tools and intrusion-prevention technology.

Long-Distance Classes
The days of freshmen drinking lattes in the student union or playing Frisbee in the quad are becoming things of the past. Distance learning pioneered by the University of Phoenix is taking hold in the halls of higher learning and professional training institutions. As colleges and training companies adopt the distance-learning model, they'll need a host of hardware, software and integration to make a go of their online curricula.

Helping Hands
For all the progress that K-12 school systems are making in implementing technology, few have the dedicated IT staff necessary to maintain these newfound solutions. Rather than dedicate valuable space and dollars to hiring new employees, most are handing off support services to industry, selecting solution providers--typically local ones--to act as the district's own pseudo-help desk. That support ranges from simple on-call maintenance to managed services, with solution providers maintaining systems and applications from remote locations.

On Campus, Online
More than half of U.S. universities now require freshmen to have a laptop. But computing power isn't enough. Colleges and universities are realizing they need to connect their student bodies to their infrastructures. Building wireless networks, ensuring client security and network integrity, and providing access to online resources represent a huge challenge. Many schools will look to their solution-provider partners to piece together the puzzle of student network connectivity.

NEXT: Health Care Trends

HEALTH CARE

The Patient Went Where?
During hospital stays, ever notice how nurses seem to know your every move? They know when you get up, when you go to the bathroom and when you sleep. Hospitals are all about efficiency, and they're always looking for new ways to track patients, whether it be their physical movement or health histories. Often, this means integrating monitoring devices with CRM applications and alerting mechanisms. Big Brotherish? Perhaps. But it's a good opportunity for solution providers that can create innovative tracking systems.

Outpatient IT Clinics
With the march toward electronic health records, administrative burdens and costs associated with centralization, consolidation, computer-based records management and standards compliance pile a lot of pressure on health providers. The solution? Many health-care institutions are making it someone else's problem by transferring systems and administrative responsibilities to industry partners.

HIPAA: The Data Generator
The Health Insurance Portability and Accountability Act (HIPAA) is turning into a huge data generator. Health-care providers are struggling to store all of the information required under the law and provide adequate backup and disaster-recovery systems. Everyone, from hospitals to local clinics, is looking for help in storing, protecting and managing their HIPAA-required data. And managing that information is important, since no administrator wants to face the stiff penalties for noncompliance.

E-Systems, Stat!
Whether it's simply to get that much-needed shot of morphine or to notify an ICU nurse that a patient is flatlining, communication systems have to go beyond the days of pagers and waiting for doctors to do their rounds. Hospitals are rapidly implementing top-of-the-line systems that integrate wireless phones, nurse call systems and middleware for patient alerts and provider response.

Aesthetic Touches
Hospitals and medical offices often house some of the most amazing feats of technological innovation. But technology is often being deployed in 20th-century bricks-and-mortar buildings. Solution providers must come up with creative ways to deploy their systems in narrow hallways and through solid concrete walls. Accessories--wall mounts for displays, standing laptop carts, adjustable workstations, wireless handhelds--are just some of the ways of getting around stationary objects.

Staking A Claim
Health-care facilities juggle two huge challenges right now: managing Medicare and Medicaid claims, and establishing electronic medical records. Administrators are increasingly looking to solution providers to help them tackle both at the same time. Portal technology allows claim-processing systems to be integrated with patients' medical-records systems and makes them accessible from a health-care provider's own distributed network.

Emptying Filing Cabinets
Those vast repositories of data on patient health histories are quickly disappearing. Health-care providers are getting rid of those bulky cabinets and digitizing all of their patients' records. According to the Centers for Disease Control and Prevention's National Center for Health Statistics' report, almost one in four doctors partially or fully uses electronic record-keeping. Also on the horizon, federal efforts to create a national health-information network will up the ante in terms of the IT needs of medical facilities.

NEXT: Uber Trends Trends

UBER TRENDS

Toughening Up
Whether you're talking about combat troops accessing the DoD network or first-responders scanning Wi-Fi access points, mobile devices are undergoing a makeover. Rugged notebooks and handhelds are in huge demand, allowing America's finest to stay connected despite harsh conditions. Vendors are releasing the next generation of hardened laptops and handheld devices, creating new opportunities for systems building on multiple public-sector levels.

At Your Service
While government contracting still supports piecemeal purchasing, with major emphasis being placed on the cost of commodity items, what agencies actually want are solutions where technology is wrapped in associated services that create a distinctive value-add. Slowly, contracting is following suit--with more opportunities presented as service contracts--despite requirements for varying degrees of base technologies. That will ensure agencies indeed get the full package rather than the piece of technology that offers the deepest discount.

D-CIA
A new office within the Central Intelligence Agency? Nope. D-CIA stands for data confidentiality, integrity and availability, a priority for all segments of government, health care and education. Everyone in the public sector is reeling from the woes of breaches: the VA's stolen laptop, Ohio University's compromised alumni database--and the list goes on. Laws such as HIPAA, the Federal Information Security Management Act (FISMA) and the Family Rights to Privacy Act require data security in all areas of the public sector. Security breaches will prompt all areas of the public sector to invest in perimeter security, identity management and data-protection solutions.

Enabling E-Government
Sure, the term e-government seems pretty self-explanatory, assuming one knows enough to realize that the 'e' stands for electronic. But just try to explain e-government in terms of implementation and it could be an hours-long endeavor. For the federal government, it means accessing agency information and, to some extent, such online services as tax filing. But state and local governments are often more ambitious still, incorporating interactive Web portals that enable a whole slew of citizen services and correspondence with individual agencies. E-government isn't going anywhere; rather, it's morphing, as new technology allows for new capabilities over the Internet.

Can You Hear VoIP Now?
As the work force for all levels of government expands across the country and often around the globe, agencies are taking full advantage of Internet efficiencies by having data and voice traffic share the same medium. This convergence is blurring the line between telecom and data networks, driving demand for more feature-rich network devices.

Thinking Vertically
Rather than tailoring CRM applications internally, government agencies, health-care facilities and educational institutions are seeking full solutions that incorporate focused applications to address specific requirements--from electronic registration and ticketing solutions to social services and health-insurance applications.

Exact Points On A Map
The advantages of Geographic Information Systems (GISes) span the gamut, from assisting first-responders in locating accidents to enhancing missile-warning satellite systems for homeland security. And as more and more first-responders and military troops leverage communication networks, GISes are being incorporated and customized for new and evolving missions. The opportunity for solution providers is in incorporating these GISes into a variety of applications, including logistics systems, and resource and inventory management.

Cooperative Processing
The concept of farming out pieces of a program to thousands of computers at the same time seems very Mission Impossible-like--and absolutely perfect for government, health care and education. The advantages of grid computing are obvious in the education arena, as universities link together to share academic research, but the same applies in other segments of the public sector. Government and health care, for example, are both leveraging the opportunity to pull information from a huge network of resources. Linking those systems and adapting grid-enabling middleware is the challenge for solution providers.

What's The Frequency?
Slowly but surely, bar codes are getting nudged out of the public sector and replaced by the far sexier--and more promising--radio frequency identification (RFID) technology. The DoD forced RFID into the spotlight when it mandated that its 60,000 suppliers use passive RFID in military shipments by 2007. Federal and state governments are pushing the pharmaceutical industry to use automatic identification technology to control the prescription-drug supply chain. RFID has numerous applications; with the public-sector market willing to buy, solution providers have a rich opportunity to be innovative.