Across the Digital Nation: Set your sites on these five market segments

Rishi Sood

The state and local government market is large and complex. Companies can best get a handle on this market by targeting these five major segments: administration and finance, tax and revenue, transportation, health and human services, and public safety and criminal justice.

These segments, which can include multiple agencies, direct most technology spending across state and local entities, and different needs drive them, such as modernizing systems, responding to new requirements or making operational functions more innovative.

Here is a brief synopsis of the major trends in each segment.

Administration and finance: Given the budget issues over the past 18 months, this segment is most interested in tools and systems that provide a comprehensive understanding of present government finances and modeling future changes. This business driver has led to a new round of enterprise resource planning development. Another key area here is the revival of e-procurement systems to reduce costs, streamline processes and maximize discounts.

From the first wave of development, state and local organizations have learned valuable lessons that appear to be paying dividends in pushing new e-procurement initiatives forward.

Tax and revenue: Over the past two years, senior executives have focused considerably on this segment, eager to improve revenue collection. At the state level, one of the most important technology trends is the increasing need for integrated tax systems that are supported by more auditing and enforcement tools. These projects have been successful in increasing collections and providing a direct funding model to mitigate upfront development costs.

At the local level, this trend is reinforced by market activity around the outsourcing of property appraisal services.

Transportation: One of the most important technology issues facing this segment is the reauthorization of the Transportation Equity Act for the 21st Century. The extension of TEA-21 to the end of March equals greater federal funding for much needed transportation infrastructure projects that will drive the opportunities around intelligent transportation systems.

Within the motor vehicles segment, the lack of a de facto national identification card makes for a continuing push to modernize driver's licensing systems and possibly extend biometric information within these programs.

At the local level, public works agencies continue to invest in management systems to manage operational issues.

Health and human services: Possibly two of the most significant areas of technology development, health and human services agencies must meet new requirements to update and extend systems. Supported by federal funding, there are opportunities to support Medicaid, unemployment insurance, child welfare and children's health insurance programs.

These segments are expanding the use of business process outsourcing for multiple functions and testing the use of enterprise foundations to build scalable, nonproprietary systems.

Public safety and criminal justice: These segments are prime areas for homeland security development, but there has not been a major boom in technology spending in these areas since Sept. 11, 2001. Over the next year, improving communications infrastructures and sharing data via integrated justice systems will be important priorities for these organizations.

Moreover, a number of forward-looking jurisdictions are using increased fee structures to fund court modernization efforts, and spearhead standardization of systems across several jurisdictions.

These summaries are only a partial look into the complex business issues and technology opportunities within each segment. To be successful in this marketplace, vendors must be well versed in the differing issues and policies affecting each segment.

Rishi Sood is a principal analyst with Gartner Dataquest in Mountain View, Calif. His e-mail address is

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