State and local e-gov spending to double by '08

The state and local market for e-government products and services will soon reverse its dramatic decline, according to a report released today by Input Inc., a Reston, Va., government information technology research firm.

Between 2005 and 2008, e-government spending will more than double over 2004 spending levels, according to the report. The growth will be driven by spending on integration and consolidation of government back-end systems.

At first, growth will be moderate, and then accelerate rapidly in fiscal 2006 and 2007, according to the report. Over the next two years, e-government spending will increase about 8 percent annually, as governments exhaust opportunities to broaden Web site operations and begin to plan for the next phase of e-government: integration and system consolidation, and development of fully interactive portals.

By fiscal 2006 and 2007, spending growth should reach an approximate compound annual growth rate of 30 percent, the report said.

State and local e-government spending peaked in fiscal 2002 at $700 million and then decline about 60 percent over the next year. Spending dropped another 50 percent by 2004, Input's analysis said. The decline was driven by state and local budget shortfalls and disillusionment in the effectiveness of e-gov services, according to the report.

"Current trends towards real measurement in government performance and a closer review of government across business lines will guide the growth of the e-government market moving forward," the report said.

"As governments complete plans and begin widespread integration and process improvement across agencies, services will increasingly be tied to new more fully interactive portals that will be automated for citizens," said James Krouse, manager of state and local market analysis at Input.

Obstacles facing state and local governments in the next phase of e-government development still include budget constraints, the report said. Other obstacles include difficulty producing measurable returns on investment and disagreements where agencies must integrate operations.