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

On July 1, 46 states kicked off new budgets. While many chief information officers (CIOs) will stay the course, continuing projects that remain a priority from last year, others will take a fresh look at their infrastructures to decide what initiatives (if any) need to be added to their priority lists.

In 2006, 41 states had budget surpluses, though much of that went to areas other than technology, including higher education, energy issues, economic development, research and development, and citizen health care coverage and insurance. That said, IT does benefit from flush budgets.

According to Reston, Va.-based Input, total state IT spending will grow from $30 billion in 2007 to $42 billion in 2012, slowing a bit by 2009 as consolidation and modernization level off. State and local government spending will increase proportionately to one another, with a compound annual growth rate of 6.6 percent.

Whether ongoing programs or new initiatives, the key drivers of state IT spending remain the same: consolidation and integration, with special attention paid to security, privacy issues and cost.

"At this point, a lot of states are focusing on the same efforts as last year," says Chris Dixon, manager of state and local industry analysis at Input. "[Solution providers] need to find a way to make employees more efficient. That's what states will invest in."

Shrink the Infrastructure, Grow the Productivity

Hardware purchasing remains conservative in state government, with legacy systems staying intact and few plans to rip and replace.

"Never count out the mainframe systems humming along," Dixon says. "Until they can come up with an appealing solution to pull the engine out while the car is still moving, they'll remain."

Rather than an infrastructure overhaul, states will purchase computer equipment piecemeal. The state of Florida, for example, plans to bid a master contract for statewide access to computer equipment. While details are not yet finalized, Input predicts a total value of up to $300 million, with investment in everything from PCs, thin clients, servers and network equipment, to storage and peripherals.

"When you look at budgeting, you'll see moderate growth rather than the double-digit growth of the last few years," says Alan Bechara, president of Chantilly, Va.-based PC Mall Gov. "That will force more consolidation efforts. Is that anything new? No. But the needs are growing."

And attention on areas like disaster recovery by extension creates a need for robust, off-site storage facilities. Also, homeland security will drive sales of biometrics, radar, alerting and video equipment," he says.

Input predicts contracted spending on computer equipment by state and local government to grow from $9.7 billion in 2007 to nearly $12 billion in 2012. Beyond consolidation, states will spend more on networking hardware that supports a transition to IPv6 and wireless technologies for the mobile workforce—from digital meter readers to asset tracking devices that incorporate RFID.

States will also look to industry partners to provide maintenance and support—particularly as government employee numbers shrink. Waukesha, Wis.-based Xerographic Supply, for example, recently won a contract to offer Lexmark and Xerox printers and multifunction machines to all agencies in their home state.

"With regard to computing products, Wisconsin is moving toward the purchase of extended warranties that go beyond the manufacturers' standard one year," says Christine Leny, vice president of marketing at Xerographic. "In a cost-saving measure, the state has determined that [private sector partners] can maintain the equipment at a far less cost than utilizing state employees."

Solution providers that can offer an economic alternative to replacing systems will win opportunities.

"In the large states, the question remains, 'How can data center management be used to better manage resources?'" says Alex Hart, director of state, local and academic channels at Symantec. "EMC solutions work great on EMC boxes, but often that's not all that's populating these data centers. For states like California and Texas, there's a serious need for more holistic solutions that reclaim storage space not being used effectively."