Year 2000 Work, Outsourcing Lead State, Local To-Do Lists

Year 2000 Work, Outsourcing Lead State, Local To-Do Lists

By Andrea Novotny

Year 2000 computer problems and outsourcing initiatives are the two biggest things on the plates of state and local government information technology officials for 1998, analysts say.

Connecticut, for example, is expected to spend $1.4 billion to outsource its information technology management over the next seven years. And Pennsylvania is poised to invest up to $400 million on new information technology services.

But the biggest growth area in state and local information technology spending will be in year 2000 software repairs, said Thomas Davies, vice president of state and local for Federal Sources. Welfare reform will be the second largest area of growth, he said.

Federal Sources, a market research firm in McLean, Va., estimates that state and local information technology spending will increase from the current level of $42 billion to more than $46 billion in the next year.

IBM photo

State and local governments "are moving dramatically into the world of electronic commerce."

-Miles Weigold
IBM Global Government Industry

As state and local governments prioritize their technology spending and redirect existing budgets toward correcting the year 2000 software glitch, more conversion work will be turned over to outside vendors, analysts and industry officials said.

Pennsylvania is outsourcing 42 percent of its year 2000 work, said Scott Elliott, a spokesman for the Pennsylvania Office for Information Technology. The state has 36 vendors pre-approved to do year 2000 work through an innovative procurement process, Elliott said.

Nationwide, not counting the Connecticut plan, state and local government outsourcing of infotech is growing 20 percent annually and is projected to account for $936 million in contracts this year, according to G2R Inc., a research firm based in Mountain View, Calif.

State and local governments also are considering more Internet and intranet solutions for streamlining their operations and making them more responsive to citizen's needs especially in health and human services and administration and finance agencies, analysts said.

Health and welfare reform will boost the use of electronic benefits transfers and telemedicine, analysts said. The United States Department of Agriculture has mandated the use of electronic data transfers as a method of distributing food stamp benefits. The first systems addressing that mandate will go online in 1998.

As for telemedicine, doctors are using information technology to analyze patient data and records to supplement rural and under-served communities. Telemedicine is being advanced by government and industry partly with the aid of funding by the federal government.

Meanwhile, administration and finance agencies will look to online procurement methods and electronic tax filing to improve efficiency and save money, analysts said.

For companies like Unisys Corp. of Blue Bell, Pa., providing services to administration and finance agencies - particularly in the tax arena - makes up the largest part of the company's state and local government business. Unisys expects its state and local business to grow by up to 20 percent in 1998, said Maury Shepherd, director of business planning for public sector market group in the Information Services Group of Unisys.

"All of us at IBM Global Government Industry are thinking first and foremost about electronic commerce," said Miles Weigold, local government segment manager for IBM Global Government Industry, based in Bethesda, Md. State and local governments "are moving dramatically into the world of electronic commerce," he said. This is being fueled by growing citizen demand for improved government services and the lowered costs of information technology.

Less than one percent of state and local governments are delivering services electronically today, but that number will increase many fold in 1998, Weigold said.

States also will look to Internet and intranet solutions to provide them with the network infrastructure needed to handle the federal government's devolution of welfare and other programs to the states. Most states are still trying to determine how to proceed with the sweeping welfare reforms enacted by Congress late in 1996.

Next year, states will further develop and begin implementation of their welfare reform projects, said Leslie Kao, a public-sector market research analyst for G2R Inc. "In health and human services there has been a major change in policy in the last year," said Larry Singer, president of Public Interest Breakthroughs Inc., a nonprofit Vienna, Va., group supporting state and local governments.

States are "waiting for program managers to translate new [health and human service] policies into new business processes and organizational structures," Singer said.

Once the program redesign has begun, he said, information technology will be used by state and local governments to implement the changes and "states will take advantage of new technology, like the Internet, universal data bases and advanced geographic information systems," Singer said.

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