States' IT Spending Will Keep Growing

It's an old refrain: Government should be run like a business. But government isn't a business, which explains why IT spending among the 50 states will grow at a 1.8% annual clip in the next two years despite $68.5 billion in red ink from combined budget shortfalls, according to Federal Sources Inc., a government IT intelligence consulting firm.

Governors see IT as a way to help simplify government operations, says Federal Sources CEO Jim Kane, who adds that state IT spending will reach $41.5 billion in 2005 and should benefit outsourcers.

The consulting firm estimates that 60% of state IT spending will be earmarked for systems to support health and human services and finance and administration. Homeland security will represent only 5% of IT spending by 2005. "There's a couple of billion dollars out there," Kane says of homeland security outsourcing opportunities in state government. "It's no bonanza, but it's a good, solid business."