Datamonitor: State and local IT spending to increase

State and local governments will spend more on information technology during the next five years to improve constituent services, reduce costs and improve efficiency of operations, according to a new report released last week.

Datamonitor, an independent market analysis firm, estimated state and local IT spending will increase from $55 billion in fiscal 2004 to $62.4 billion by fiscal 2009.

The firm predicts that state and local governments will concentrate spending on public safety, justice programs, health care and human services, which currently account for a little more than half of their total IT investment.

“State and local governments are investing in technology in response to public and media attention on their capabilities to handle emergency situations and support community protection on an ongoing basis,” said Kate McCurdy, Datamonitor’s public-sector technology analyst and the report’s author, in a press release.

“In addition, technology offers state and local governments opportunities to reduce the administrative costs of social services while also improving employee productivity and accuracy,” she added.

State and local agencies will also invest more in software to improve back-office systems and services –- such as support, consulting, systems integration and outsourcing -– than in hardware and networking equipment, she said. Outsourcing will grow as older IT workers retire and agencies try to reduce administrative costs and keep up with technology trends.

By centralizing IT management and operations into one office, agencies can reduce IT operating costs, eliminate redundancies and improve efficiency and productivity. Although those aren’t new trends, the report states other reasons for consolidating, such as isolating IT management from political agendas.

For example, California recently consolidated its technology operations into one new department for the second time in 10 years. “What makes this undertaking different from the previous endeavor is that it is one facet of Gov. Schwarzenegger’s pledge to make the California’s government more responsive to constituent needs,” McCurdy said.

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