Across the Digital Nation

Golden rule No. 1: Follow the federal money

Rishi Sood

The state and local government marketplace is comprised of many distinct industry characteristics and buying behaviors. Vendors targeting this marketplace must acknowledge the lengthy sales cycle, penetrate multiple buying centers, educate non-technical decision-makers and adhere to rigid procurement practices.

Given these unique market dynamics, successful vendors must find ways to separate implementation opportunities from the chaff of technology strategies among public-sector agencies.

Over the years, one of the foremost drivers of new technology fulfillment among state and local governments has been federal legislation. In many respects, funded federal mandates have been a top technology priority for state and local government agencies.

Consequently, one of the golden rules of targeting the public-sector marketplace is to follow the money trail from new federal government activity to realization at the state and local level.

Human services departments are an excellent example of the impact federal initiatives and funding can have on state and local technology use. The federal government has used new legislative requirements, matching funds, block grants and resource-sensitive deadlines to spur state and local entities to develop new technology solutions to support social service programs and delivery.

Over the past 15 years, social services agencies have introduced solutions as diverse as family assistance management information systems, child support enforcement, electronic benefits transfer and state automated child welfare systems. Successful vendors not only followed the flow of funds to related programs, but also understood the time-sensitive nature of these initiatives.

More recently, funding from federal transportation legislation has enabled numerous states to move from simply building highways to making them more efficient. Technology advances, such as electronic toll collection, traffic management systems and incident management systems, have created smarter alternatives to traditional congestion.

Additional funding expected for public transit will increase new technology implementation over the next three years. Vendors that have keyed on these programs understand that the nature of these funds has changed with the newer priorities.

Given the tight fiscal environment among the states and the new initiatives stemming from the events of Sept. 11, the federal government once again will play an active role in developing state and local technology solutions. Based on President Bush's budget proposal, the Office of Homeland Security will undoubtedly play a role in improving the flow of information within the levels of government and across jurisdictional boundaries by using new technology solutions.

Matching grants will be used to help modernize and standardize the data collection efforts at local sheriff's departments, state police and federal intelligence agencies. Budget allocations for cybersecurity, emergency preparedness and bioterrorism will drive new initiatives for public-sector CIOs as well as specific agency segments, such as departments of health.

Consequently, the vendor community should adhere to two parallel tracks for 2002. Since many state and local governments are facing budget shortfalls, vendors should focus on core customers to stabilize revenue flow. This will solidify the trusted adviser role for many vendors and provide the most efficient use of resources.

This will also enable vendors to have early entry status once the economic picture brightens, likely during the second half of 2002. At the same time, vendors must also piggyback on federal activity that will flow to state and local government technology implementation. Now more than ever, the old adage rings true: Follow the federal money.

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

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