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State and local governments spend $3 trillion. 2X federal, excluding defense19 million workers 7X federal & > manufacturing, retail, construction & financeAn industry of industries90,000 governments and 600,000 business entities 19 states would qualify as Fortune 100 State and Local Government

The state and local government market continues to recover and show signs of strength.

State and local government salaries grew by 1.6% last year.

The GovTech market is THE Market to be in.There is money to be made in solving government problems. State and Local Government

State spending is up 5.7%.The majority of states (43) enacted budgets with general fund increases in 2015.General fund spending is up 3.1% since 2014.

State Government Outlook

Sources: NASBO480% of city finance officers report that cities are better able to meet fiscal needs.

For the first time since 2008, cities are increasing their workforce size.

Counties are trending in the right direction but recovery remains slowed.

Local Government Outlook

Sources: NLC5Education K-12 and Higher EdMedicaidCorrectionsTransportationWorkforce Healthcare and PensionsTax Reform

State and Local Government Competing Priorities

State IT budgets have increased by an estimated 3.9%.

The top 100 cities and top 100 counties IT budgets have increased by an estimated 3%.

In 2015, the Center for Digital Government projects that IT spending will be nearly $97 billion.

What does this mean for Tech spending?Hire and Retain Competent IT PersonnelMobile ApplicationsCloud ComputingShared ServicesCyber Security12345Data Center ConsolidationHealth Care; and VirtualizationPortal/E-GovernmentGovernance; and Disaster Recovery/Business ContinuityOpen Government/Transparency/Open Data; and Budget & Cost Control6789102014-2016 Digital States Survey CIO PrioritiesMobility/Mobile ApplicationsBudget and Cost ControlShared ServicesHire & Retain Competent IT PersonnelCyber Security12345Governance/Data Center Consolidation & Cloud ComputingBroadband and ConnectivityVirtualization/Portal E-GovernmentOpen Government/ Transparency/Open DataDisaster Recovery/Business Continuity678910Top 10 Priorities for Counties with an Increased Focus in 2015Disaster Recovery/ Continuity of OperationsPortal/E-Government & IT StaffingCyber SecurityMobility/Mobile ApplicationsOpen Government/ Transparency/Open Data12345Shared ServicesBudget and Cost ControlSocial MediaCloud ComputingBroadband and Connectivity; Virtualization678910Top 10 Priorities for Cities with an Increased Focus in 20152011-2014 State IT Spending (in billions)

2011-2014 Top 100 City and County IT Spending (in billions)

2013 vs 2014 State and Local IT RFP/Bid Volume

6.6% increase over 2013

DRIVERSMedicaid ExpansionEvolution of Affordable Care ActSocial Services ModernizationIT OPPORTUNITIESContinued development of Health Information ExchangesCompletion of MMIS modernizationsModernization: Child Welfare, Adult Protective Services, WICAnalytics: Claims, fraud, demographics, reportingExpansion of online and mobile

Health and Human Services

2015 Est. IT Spend:$25 billion

DRIVERSAging infrastructureOutdated enterprise IT systemsLack of data quality Growth in citizen demand for serviceIT OPPORTUNITIESExpansion of eGovernment, mobility and online servicesMaster Data Management and improve data-sharingExpansion of Intelligent Transportation and internet of thingsPermitting expansionTransportation2015 Est. IT Spend:$9.8 billion

DRIVERSPush for greater accuracy in financialsGrowth in citizen demand for serviceIT OPPORTUNITIESERP replacement and upgradesShared services: HR and ITTax system modernizationProcurement (expansion of cooperative procurements, e-procurement and vendor management)Mobile apps and development

Finance and Administration2015 Est. IT Spend:$8.3 billion

DRIVERSCommunity safety and accountabilityPlagued by data silosIT OPPORTUNITIESWearables/CamerasVideo surveillanceData: Security, integrity, sharing and analyticsDisaster recovery and business continuity Network/Connectivity/BandwidthOffender Management System modernization and replacement

Justice and Public Safety2015 Est. IT Spend:$7.3 billion

DRIVERSCommon Core roll outTransition to digital contentExpansion of E-Rate programIT OPPORTUNITIESMobile devicesDigital curriculum Network/Connectivity/Bandwidth

Education: K-122015 Est. IT Spend:$10.2 billion

DRIVERSEnrollment growthBudget constraintsIT OPPORTUNITIESInstructional use of videoOnline and blended learning solutionsCloud computingWireless networking

Education: Higher Education2015 Est. IT Spend:$10.5 billion

States and localities are still very much challenged by outdated IT infrastructure.

Nearly 60% of respondents report having failed or problematic projects due to their inadequate IT infrastructure. Lessons Learned the Hard Way

Nearly half of state and local respondents plan to modernize their IT infrastructure in the next 12 months.Bulk of modernization is planned within the next 5 years.Will governments stay in the infrastructure business? IT Infrastructure Modernization

Only 38% report that their primary data center fully meets their needsA Big Push to the Cloud in 2015?State and local revenue continues to climb slowly above pre-recession levels.

Governors, mayors and legislators will focus on political hot buttons.

The federal government and the political process remains very polarized.Outlook

There is initial recognition that delayed and deferred investment in critical infrastructure must be addressed.

State and local governments are open to alternatives to traditional acquisition and support models for HHS and enterprise administrative systems.

Interest in data-sharing and analytics is increasing.

Outlook

Innovation will be incremental in the near term and tied to modernization of existing systems.

Public sector workforce challenges and changes will create new opportunities for industry partners.

Outlook

Market Forecast 2015Todd SanderExecutive DirectorCenter for Digital Governmenttsander@erepublic.com Joseph MorrisDirector of Market IntelligenceCenter for Digital Governmentjmorris@erepublic.com