Input: State and local IT spending surge begins

The drive to centralize IT resources, consolidate IT operations and outsource non-essential government functions is expected to feed substantial growth in the state and local market over the next five years, according to market research firm Input Inc.

State and local IT spending likely will grow from about $50 billion in 2006 to $72 billion by fiscal 2011, according to a forecast released today by the Reston, Va.-based firm.

"We're seeing a well-warranted, major rebound in state and local spending," said Jim Krouse, Input's state and local market analysis manager.

IT spending will gain significant momentum between now and fiscal 2008, largely because of the inevitable depletion of experienced government workers and aging technologies, Input said. The forecast projects continued growth, but at a slower rate, from fiscal 2009 through fiscal 2011 as governments re-evaluate IT expenditures.

A period of conservative spending between fiscal 2003 and 2005, where state and local budgets were stabilizing and building themselves, resulted in pent-up demand for technologies, Krouse said.

"As a result, spending will be more aggressive than originally expected in fiscal 2006, and we project IT spending will continue to accelerate in both fiscal 2007 and 2008," he said.

Professional services will continue to be the leading market segment in state and local government IT expenditures, Input predicted, followed by telecommunications and networks. Initiatives for advanced, interoperable communications systems to coordinate law enforcement, border security and homeland security will fuel growth in the telecommunication and networks segment. Similar needs in the tax and revenue and health care vertical markets will spur growth there.