State and local IT picture improves

Analysts at market research firm IDC predict better times ahead for companies that sell information technology products and services to state and local government officials.

IDC analysts expect demand to increase by a compound average growth rate of 6.8 percent per year during the next five years after recent lean times of flat IT budgets.

The push to system consolidation and mandates on state and local government officials to share data with the federal government are the main catalysts for this growth, said Shawn McCarthy, IDC's program manager for U.S. IT opportunity government and education.

State governments historically have developed separate systems for separate projects, he said, which led to compatibility issues and extra software licensing costs. But now they are beginning to follow the example of the federal government, which is standardizing applications and licensing structures.

As far as sharing data is concerned, he said, the major impetus there comes from homeland security needs.

"I see data sharing as a key driver in the next couple of years," McCarthy said. "I've seen an uptick in the purchase of application development tools as a result."

The IDC study sees packaged software as the leading growth area, reaching a total of a little more than $2.6 billion in 2009 compared to $1.79 million in 2003 for an average yearly growth of 7.9 percent. Hardware sales will grow 6.7 percent a year to $3.81 billion, while services will reach nearly $4.58 billion for a 6.3 percent average year rate.

However, the IDC study sees a significant split in the kinds of market growth that will occur at the state and local level. State IT purchases will increase at a yearly average of 5.8 percent, while local sales will grow at only 3.9 percent.

Brian Robinson is a freelance journalist based in Portland, Ore. He can be reached at hullite@mindspring.com.