Contractors should watch state and local spending trends

For those who specialize in work for state and local governments, it can be unsettling to read headlines announcing teacher layoffs in Chicago or bankruptcy in Detroit.

However, the big picture for local governments and school districts is looking much brighter.

Deltek’s growth forecast for state and local consumption of information technology goods and services improved this year to 3.2 percent, with the total market expected to grow from $58.5 billion in 2013 to $68.6 billion in 2018.

One of the best annual market indicators is a review of the governors’ State of the State addresses.

This year, we found governors restoring K-12 education funding and promising to rein in tuition at public universities.

Governors also called for innovative ways to reduce correctional spending and improve health care and social services. All of these goals must be supported by technology investments.

A survey of city and county IT officials, conducted jointly by Deltek and the Public Technology Institute, finds that most respondents expect their budgets to remain stable or improve in the coming year. This marks a significant improvement over past years.

In such a diverse market, it’s nearly impossible to predict which trends will dominate the landscape. However, contractors should watch two in particular: education and safety, and back-office modernization.

Education and public safety represent the lion’s share of state and local spending. As budgets pick up, districts will bring on new police officers and teachers to make up for past hiring freezes and layoffs.

The classroom and patrol car should be at the forefront of government IT innovation. Teachers may leverage tablet computers to reduce paperwork, deliver adaptive lessons and provide increasingly individualized instruction. Police officers are likely to take ever more robust investigative and communications technology into the field.

In the back office, consolidation and streamlining should take priority. Process improvements will likely drive a host of systems integration and modernization needs.

Business intelligence and big data are likely to increasingly guide public sector decision making. IT leaders will need expert consultants to help them make the best use of the cloud.

State and local governments emerge from recessions hungrier, but they only have a few years before institutional drag slows them down. This year and next could be the time for vendors to step in and help state and local leaders implement new technologies.

Chris Dixon is senior manager of state and local industry analysis at Herndon-based Deltek, which analyzes the government contracting market and can be found at www.deltek.com.

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