Eye on the States

Keep a Watch for these Megatrends

Thomas R. Davies

By Thomas R. Davies

The outlook for the state government IT market has never been better. The recently released governors' budget recommendations for 2000 are filled with ambitious plans and spending priorities. It is no surprise that companies, intent on growing their state government business, are looking forward to the upcoming year.

Having recently completed a comprehensive analysis of the budgets, Federal Sources Inc.'s state government research staff has identified some megatrends emerging in the states.

Three conditions must be met to classify a market opportunity as a megatrend. First, the opportunity needs to have multiple drivers. Drivers in the state government market move the states in a single direction and are the underlying causes of the trends. Some primary drivers in state government are shifting demographics, economic forces, technology changes, rising citizen expectations and legislation. When several of these converge, it usually translates into a major market opportunity for the IT industry.

Second, there needs to be at least one sustainable source of financing available to the states. Budget surpluses, federal grants, fees and fines and general appropriation dollars contribute to increased state spending.

The last condition is that many states need to move in a similar direction. Not all state buying is economically beneficial to companies. When only one state undertakes a new IT initiative, regardless of how attractive it is, there is not enough leverage for companies.

The more repeatable the solution across several states, the more attractive the market opportunity.

The following IT market megatrends now are evident in state government.

Electronic commerce. The states are competing head to head for jobs, skilled workers and a reputation for fast and convenient services. Electronic commerce is giving states the hope that these are within reach.

Education. The No. 1 priority of citizens and the new governors is resulting in a once-in-a-generation investment in technology. Investment in infrastructure now is under way, and solutions, content and services soon will follow.

Enterprise computing. Many governors want to do what their private-sector CEO counterparts can do: send e-mail, documents, images and data seamlessly around their states and the globe.

IT governance. Y2K has elevated the importance of IT leadership in the states to the highest levels; now that the governors have discovered why they have chief information officers, they are looking to the CIOs to take the lead on other initiatives, such as outsourcing and security.

Managed growth. IT can make a huge difference in the quality of life in metropolitan areas, giving impetus to technologies such as geographic information systems and intelligent transportation systems.

Public access. Providing citizens with customer friendly, electronic access to information and services is the uncharted future of state government. What the states have done so far pales in comparison to what is ahead.

Public safety. The states, working in concert with federal and local governments, are marching to a vision of a technology enabled, real-time, criminal justice environment.

Smart buying. Leveraging their purchasing power and adopting commercial-like buying practices, such as outsourcing, are paying off handsomely for the states. More of the same is in the forecast.

Welfare reform. Governors have declared success on welfare reform. But the real work involving new systems is just getting started, and it will heat up significantly once Y2K is a thing of the past.

Work-force development. Creating and retaining a world-class work force in the states is a strategic must. The governors know that jobs are the key to sustaining the states' economic positions. Without jobs, they will not be able to afford the investments that are needed in other areas.

So after Y2K, take your pick of any of the above. Companies that ignore these megatrends will lose out on capturing the next wave of IT spending in the states.

Thomas Davies is senior vice president for Internet services at Federal Sources Inc. in McLean, Va.

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