Across the Digital Nation

The events of Sept. 11 dramatically altered the business environment and technology trends within the state and local government market.Several tangible factors are accelerating the changes. An economic slowdown has created budget shortfalls. The need for updating emergency response and bioterrorism strategies has elevated new market segments. And homeland security has replaced electronic government as the top technology priority for public-sector organizations.Given these changes, vendors targeting the state and local market are asking: Is homeland security real? How will these projects be funded? When will the impact occur?Homeland security will be one of the largest information technology opportunities in the state and local market during the next three years. The key business issues associated with it are protecting infrastructure, supporting first responders, fighting bioterrorism and enabling data sharing and integration.The agencies that will prepare most of the technology initiatives will be police, fire departments, emergency management, health and public works. Beside agency-specific solutions, horizontal technologies such as geographic information systems, security and disaster recovery will be used more.Related initiatives up for debate, such as a national identification card, may be a major area of new development for motor vehicle departments. Administration and finance agency segments may have ancillary projects and coordinating roles at the local government level, but they are not the main focus of development. Given the fiscal climate of most state and local governments, the federal government will need to help these organizations identify requirements and provide resources for new systems. Presently, state and local governments are hard-pressed to fund development of new technology systems. A recent survey of state and local decision-makers found 80 percent believe that homeland security projects will be funded partly by federal matching and block grants. In fact, a number of important leaders in this market have suggested that new homeland security initiatives should be modeled on the successful carrot-and-stick approach of human services implementation.To that end, vendors should closely follow the money trail that will be established by the federal budget and ensuing matching and block grants that will spur technology implementation. The timing of these initiatives is less clear. Without guidance from the Office of Homeland Security on the basic requirements, funding allocations and prioritization of systems, it's difficult to determine when this opportunity will filter to the state and local market. Nonetheless, there is a growing sense of urgency to move ahead. A small appropriation has already been made to support bioterrorism efforts. Although piecemeal projects will receive funding this year, the large opportunities will likely take place in 2003 and 2004.Homeland security opportunities are still in their infancy. Vendors likely will continue to jockey for position as initiatives move from the drawing board to the contract table. In many respects, however, the agency segments that will begin the first wave of development, such as public safety and health, are traditionally not the core strengths of tier-1 vendors. Consequently, the competitive environment will certainly be fierce as vendors establish new partnering relationships and focus on alternative delivery models for the midmarket.