Spending on outsourcing levels off at state, local level

Spending on IT outsourcing at the state and local level of government grew little in 2004 according to a report by Input Inc., a market intelligence firm based in Reston, Va.

Input found spending reached $11.3 billion in 2004, slightly higher than spending in 2003.

But replacing an aging workforce and outdated legacy equipment will spark growth in 2007, reaching $17.7 billion in 2009, INPUT officials project.

The political debate surrounding offshore outsourcing was likely a factor in the slow growth of IT outsourcing spending. More than 30 states introduced legislation within the last year to restrict or prohibit sate and local government contract work from being performed outside the United States. Input officials expect this issue to impact the market over the next two years.

"The increasing demand for outsourcing in the coming years will be borne out of necessity which politics will be unable to refute," said James Krouse, manager of state and local market analysis at Input.

A summary of the report can be found at stateoutsourcing.input.com.