EYE ON THE STATES

Companies that sell to state and local governments know what a hot market this has been for the past few years. Although revenue growth is slowing down in some states, healthy increases in information technology-related spending march on. With that in mind, here are seven trends to watch that may provide some clues.The Republican governors were instrumental in convincing Texas Gov. George W. Bush to run for president and supported him steadfastly throughout the campaign.

Bush already has begun tapping Republican governors for high-level administration and party positions, and more appointments are likely forthcoming. Regardless of who gets in, count on Republican governors to have unprecedented input into the policies of the new administration, especially when it comes to federal and state programs and funding, where a sizable share of the money for state IT projects originates.Outsourcing business in state and local government is like a leaky faucet; never quite strong enough to call the plumber but a consistent drip of deals that keeps companies believing in its future. Expect to see more of the same, including more application, infrastructure and desktop management outsourcing opportunities as the burden of supporting an increasingly complex IT environment becomes too great for some state and local governments.The states made some progress on electronic government this last year, but it was a slow start. Likewise for many of the companies who do business with these customers. Expect an acceleration of efforts ? privacy and security concerns notwithstanding ? as some states, such as Washington, continue to blaze new trails and set higher standards. Time is running our for those companies that have been slow to fully reposition their state and local services for an e-gov world. They may be able to make up for lost time by acquiring some of the pure-play e-gov companies that are now struggling.States such as Pennsylvania are beginning to reap some of the benefits of leveraging the Internet in purchasing. They are using new Internet-based sourcing methods, such as reverse auctions, and moving to the Web traditional purchasing processes, such as bid notification and response. Consequently, they are gaining experience to lead the states into the uncharted waters of pooling purchasing and dollars on a national basis.

By doing so, they may obviate the benefits of opening up General Services Administration schedules to state and local governments.
More spending for education seems to be the one area on which elected officials at all levels of government ? and on both sides of the aisle ? can agree. Indications are that education buyers now are budgeting for ongoing IT investments, a favorable change from the days when schools were mostly dependent on corporate grants and donations. The election aside, Vice President Gore's legacy of a dedicated funding source for building the information superhighway in schools remains intact. Spending for IT in education will eventually grow to health care and human services proportions.Here are just some of the many areas in which state and local governments will invest: customer relationship management, unified messaging, combined front and back office applications, broadband communications capabilities, seamless industrial strength infrastructure including networks, databases and architecture.

The goal is to integrate the state and local enterprise, and the integrators are positioned to help them. Most jurisdictions realize this is not a one-year effort but a marathon. A continued healthy economy is key to the funding needed to support these investments. In this regard, keep an eye on errors in the states revenue forecasts. A slam dunk: Can you imagine any governor running for office two years from now and discovering the state's voting systems are feeding confusion and controversy? Nor can anyone else. Expect Congress to weigh in with a grant for state and local governments to modernize their voting technology. The amount already discussed is $250 million, but this should grow. A national modernization will be no small undertaking, especially in the time available. Conversion and support services will be as important as hardware and software. This is a rare opportunity to use a nationally coordinated B2B approach to sourcing technology.

The year 2001 may not have the same attention-grabbing appeal as Y2K did, but it holds the promise of being much more significant, a year in which the stars in state and local government ? both buyers and sellers ? will get a chance to shine.

Thomas Davies is senior vice president at Current Analysis, Sterling, Va. His e-mail address is tdavies@currentanalysis.com.