Local and state IT purchases on the upswing

State and local governments’ demand for information systems and services will increase from $49.6 billion in 2009 to $60.1 billion in 2014, growing the market by $10.5 billion at an annual growth rate of 3.9 percent.

That’s one of the findings in “State and Local IT Market Forecast FY 2009-2014,” a new report from INPUT, a Reston, Va.-based government business consultant and research firm. The report analyzes trends that will impact state and local government IT spending.

“The new administration has been active in shaping the direction of this market, primarily through the stimulus package,” said Tim Dowd, CEO of INPUT. “State and local governments' reliance on technology presents opportunities for vendors in the key areas of education, health care, justice and public safety, social services, and transportation.”

According to the report’s authors:

* States will spend steadily through 2011 with help from the stimulus, but growth will be stifled due to lack of confidence in revenues.
* Most state and local agencies will eliminate contractors to save employees.
* There will be an increased demand for Software as a Service (SaaS), open source, and commercial off-the-shelf (COTS) products.

Some of the factors that are shaping the state and local IT market, according to the authors, are:
* Rising unemployment and declining tax and revenue streams
* Changing gubernatorial priorities for the states and their localities
* Changing federal priorities
* Impact of the stimulus
* Fiscal crisis driving state and local agendas
* Overall fiscal outlook for the forecast period
* The impact of demographic trends on workforce, service demands and revenues

Chris Dixon, INPUT's manager, State and Local Government, offers this advice to local government administrators as they plan future IT purchases, based on data in the report:
“This is a buyer’s market for sure. Vendors will do anything to get in the door. But now is not the time to go for the bargain-basement product or solution that you wouldn’t have bought in 2006. With some negotiating, best of breed options can be had for the price of the bottom-of-the-line option from a year or two ago. Also, have contingency plans, ROI projections, and justifications in hand in case someone tries to yank your funding out from under you mid-stream. Don’t forget to check out the federal General Services Administration’s GSA Schedule 70 where local government purchasing has surged to all-time highs.”

GovPro.com asked Dixon what kinds of IT products might be in most demand among local government administrators in 2009-2010. His reply: “Anything that reduces costs from the moment of go-live. Virtualization, consolidation and energy conservation are the foremost objectives. Hiring freezes will strain IT staff to the breaking point. Public safety and emergency management budgets will consume a larger portion of local spending since cuts in these areas can draw a public backlash. However, tight budgets will dictate that agencies acquire technologies that meet urgent day-to-day needs. Ruggedized laptops, surveillance and communications interoperability technologies will always get a hearing.”

INPUT’s report recommends that IT vendors and contractors take the following steps to maximize their go-to-market strategy to take advantage of state and local business opportunities:

* Overfill the contract pipeline to compensate for contracts that will be withdrawn.
* Align short-term business development with governors’ priorities backed by stimulus funds.
* Keep an eye on long-run, non-stimulus priorities, such as IT projects in K-12 schools, which is the biggest state and local government expense.

Visit INPUT’s Web site to order the full report.