Across the Digital Nation

State and local governments are increasingly facing a human capital management crisis, particularly in technology services. The recent departure of Keith Comstock, chief technology officer of West Virginia, is yet another in a long, steady stream of CIOs that have left the public sector for other opportunities. Over the past three years, approximately 15 state and local CIOs have left, creating a vacuum in the upper echelons of technology strategy. In their places has come a wave of former private-sector CIOs, who bring fresh perspective but lack understanding of the unique characteristics of public-sector operations.Moreover, the aging of the technology work force has become a major issue. Across the nation, a significant percentage of management information services (MIS) staffs will near retirement over the next five years. This issue is further compounded by governments' historical inability to recruit, reward and retain qualified information technology personnel. There is a significant chasm between the technology knowledge that is headed for retirement and the new wave of personnel that can keep the expertise within the organization. Although the collapse of the dot-com sector has spawned a great hiring opportunity for government organizations, the long-term shortage of technology skills is still a major problem for the efficient development and management of public-sector technology solutions. The burgeoning human capital management crisis among public-sector organizations has created a dual-edge sword for government vendors. The departure of senior-level technology executives has, in some cases, stifled long-term planning, created short-term uncertainty and forced vendors to re-establish themselves with new decision-makers. At the same time, however, the emerging technology demands of e-government, homeland security and other issues have created opportunities for greater vendor involvement in major public-sector technology initiatives. Faced with declining internal MIS staffs, many government organizations have been forced to work with vendors on these high-profile projects.Buoyed by earlier Y2K engagements, IT companies have also widened their footprint in the government market. Numerous local governments are actively using vendors to develop and manage technology solutions. This has led to a greater array of local, regional and niche-specific firms active in the market, in addition to the tier 1 vendors that have long served public-sector organizations. This has also sprouted new partnerships between tier 1 vendors and smaller firms looking to maximize opportunities with government agencies.The crossover between internal MIS organizations and increasing reliance on the private sector is highlighted by the continuing shift in technology spending. Next year, for the first time, state and local governments will spend more money on vendors than on internal MIS staffs. In fact, while the growth of expenditures on internal MIS staffs is relatively flat at 3 percent, it is nearly four times larger for vendors.Given the newer market dynamics brought about by the human capital management crisis, government vendors must tread carefully. In order to be viewed as a trusted adviser, companies must help public-sector organizations meet short-term technology requirements but also plan for long-term technology strategies that emphasize stability. This would require vendors to help government agencies implement common technology architectures, increase priority on interoperability of systems and seek areas for greater consolidation of technology resources. These strategies will help public-sector organizations save money over the long term and more effectively manage IT operations with internal staff.