State, Local IT Spending to Reach $77 Billion by 2012

Total state and local information technology (IT) spending is expected to grow from approximately $55 billion in 2007 to $77 billion by 2012, representing a compound annual growth rate of 6.6%, according to initial findings from the five-year State & Local IT Industry Forecast presented at INPUT’s State and Local MarketView Conference.

Economic growth at the state level has been widespread and a majority of city and county officials are also optimistic about their jurisdictions’ financial and economic situations. Discretionary spending at the state level grew at near-record rates in 2006 and 2007. This economic environment combined with population growth and a trend toward states and localities setting their own economic, environmental, and social goals, makes the state and local market an increasingly attractive market for IT vendors.

“The recent budget recovery has allowed states and localities to make up for some of the program and technology cuts made between 2001 and 2004 - especially in the areas of health care, public safety, and education,” said Chris Dixon, manager, state and local industry analysis at INPUT. “Growth in discretionary spending will not continue at the 2006-07 pace, but the overall trend will continue to be at or near the historical average. Rising Medicaid costs at the state level, along with infrastructure and public safety costs at both the state and local levels, will drive ongoing interest in technology as a tool for streamlining and improving service delivery in all areas.”

The industry trends expected to drive significant growth during this period include the national effort to transform health care through the implementation of health IT. Interoperable communications, intelligence fusion, and information sharing will be the focus of ongoing homeland security and justice and public safety spending. Consolidation of data centers and outsourcing of IT infrastructure will be common as states and localities seek to modernize the core technologies behind general government services. However, questions linger and could restrain spending in social services IT, where the search for a successful public-private partnership model and the rise of economic populism have stymied business process outsourcing (BPO) for welfare programs.

“No public sector IT vendor can afford to overlook the state and local market,” added Dixon. “States and localities, especially, provide a lot of services that must scale up rapidly as their populations grow. With the Census Bureau projecting an additional 60 million more U.S. residents by 2030, government leaders will be looking to increase the productivity of their workforces. Technology-driven efficiency will be a critical part of the equation because public sector labor costs are very high and citizens simply do not want to give up services.”

INPUT’s complete State & Local IT Industry Forecast is available to subscribers of INPUT’s State & Local Industry Analysis subscription program. For more information on the subscription program, visit http://state.input.com or call 703-707-3500.

Established in 1974, INPUT helps companies develop federal, state, and local government business and helps public sector organizations achieve their objectives. Over 1,300 members, including small specialized companies, new entrants to the public sector, and the largest government contractors and agencies, rely on INPUT for the latest and most comprehensive procurement and market information, consulting, powerful sales management tools, and educational & networking events. For more information about INPUT, visit www.input.com or call 703-707-3500.