Forecast: Surging Economy Will Fuel IT Spending By States - InformationWeek

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Forecast: Surging Economy Will Fuel IT Spending By States

Market-intelligence firm Input projects states' spending on IT will grow 8% annually through fiscal 2009, to $64 billion.

The resurgent economy means states will find more money to spend on IT, according to a forecast issued Tuesday by Input. IT spending will grow at an annual compound rate of 8% to $64 billion in fiscal 2009, from $46 billion in the current fiscal year, the government IT market-intelligence firm projects.

The recovery will be modest this year and next, in-line with economic expansion, says James Krouse, Input's manager of state and local IT market analysis. IT spending will accelerate as governments replenish rainy-day funds and expand the use of alternative financing schemes, he says.

Input foresees the highest growth rates for professional-services outsourcing, communications and networks, and software; spending in traditional areas such as hardware and maintenance of legacy systems will remain relatively flat or decrease over the next five years.

"The increasing political receptivity of outsourcing has enabled government officials to move processes outside and to focus on core competencies in government administration," Krouse says. "Communications and network spending will also remain strong, given the increased necessity for collaborative homeland security and citizen-centric programs like E-government."

IT spending among most states and localities has been curtailed in recent years as the economic downturn sharply reduced tax revenue. But Krouse says sustained economic activity combined with forced changes in state and local tax structures and an aging government workforce should help push recovery in the state and local IT markets.

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