Across the Digital Nation: State, local governments sail into stormy 2003

Rishi Sood

The elections. The economy. The graying work force. Chief information officer resignations. All these are shaping technology strategies within the public sector and leading to one conclusion: State and local government organizations face a monumental challenge this year.

The combination of these events is creating a perfect storm that challenges the pace of technology advancement within government organizations and the willingness of individual agencies to work for the benefit of the enterprise.

There are four major components of this storm. First, there are 24 new governors across the nation. In many respects, these public-sector chief executive officers have new priorities and structural concerns that will affect the size and rate of technology implementation.

Second, projected budget deficits -- $21 billion in California, $6 billion in New York and New Jersey, $1.5 billion in Texas, $1.2 billion in Maryland -- continue to force operational cuts and reassessment of technology priorities.

Third, internal skill shortages are a key issue for government agencies, as staff begin to retire in large numbers, and fewer recruits can fill the void.

Lastly, the recent departures of state CIOs in Iowa, Utah and Georgia highlight the continuing vacuum of technology leadership within state enterprises. This trend will be exacerbated by at least 12 other CIO departures over the next six months.

The short-term impact of this storm is becoming clearer. State and local governments have created new technology priorities and postponed nonessential development. The key areas that still have green lights include:

* Revenue generating functions, such as integrated tax systems and red light traffic cameras;

* Cost management solutions, such as the renaissance of enterprise resource planning applications;

* Projects that focus on hardening the infrastructure.

Most other solutions are secondary in nature or will require an additional funding source, such as matching grants, to garner support.

To keep this storm from capsizing the enterprise, state and local governments must stay focused on key structural issues. In particular, public-sector organizations must continue work on effective governance strategies and evangelize the benefits of enterprise architecture, IT standards and interoperability.

Moreover, these organizations should take inventory of skill sets, align competencies with core missions and identify areas that can be consolidated and outsourced.

Despite the flat growth projected in information technology spending for 2003, the perfect storm may motivate state and local government organizations to embrace new technology strategies over the long term. Particular areas that may get more receptivity in this market environment include strategic technology outsourcing, willingness for greater external hosting, reliance on business process outsourcing, and mandatory use of enterprise applications. The increased use of these strategies will lead to significantly higher growth in market opportunities over the next five years.

As a result, vendors must continue to invest and work with state and local government partners to shape these long-term, strategic choices in this market. Vendors must not only build momentum within the cadre of new governors and CIOs, but also create pathways for enclaves traditionally resistant to these strategies to recognize the benefits to the enterprise over the long term.

Similarly, vendors can use the growing federal government market as an analogy of how new technology strategies can deliver tangible results, such as cost savings or improved efficiency. *

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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