State IT to grow, Input says

Analysts at market research firm Input predict that state and local governments will increase their information technology spending from $48 billion in fiscal 2005 to about $70 billion by fiscal 2010.

However, James Krouse, Input’s manager of state and local market analysis, said government spending in fiscal 2005 will be cautious followed by a slight acceleration the following year.

After a gradual recovery in the next three years, “it’s all going to be the windfall we expect,” he said during a presentation today.

Overall, the compound annual growth rate will be about 8 percent, Krouse predicted. His forecast projects that IT spending in professional services will lead the market with a 14.2 percent compounded annual growth rate through 2010; telecommunications will see an 11.4 percent growth rate; and software is projected to receive an 8 percent growth rate.

IT spending will decline for hardware, maintenance, supplies and in-house staff, Input officials believe. As the state and local IT workforce faces retirement in the next few years, even as officials consider potential problems with recruiting younger workers, state and local governments will be forced to look at outsourcing beginning in fiscal 2007, Krouse said.

Federal grants, which will target higher risk areas and include certain standards and requirements, will drive spending in the homeland security market, according to Input. Transportation, which overlaps with homeland security to some extent, is another growth area with the increased use of radio frequency identification tags and intelligent transportation systems, Krouse said.

Government officials will also seek solutions that increase tax revenues, relying less on customized solutions and more on commercial-off-the-shelf ones, if the Input forecast is correct. Analysts see health care as an area in which technology will be sought to improve performance and save money, but Krouse said he didn’t see significant IT spending until 2009. However, IT spending in the education sector will not be as strong, he said.