Federal legislation promises to bolster state and local marketplace, study finds

A new report by INPUT finds that several pieces of federal legislation will have profound impacts for the state and local government market. Emerging technologies such as cloud computing, virtualization, and open source software stand to benefit the most given the prospect of healthcare reform, federal security and transparency mandates.

Similar to the federal report issued earlier this month, cloud computing is expected to make huge gains in state and local government. According to INPUT’s state and local government outlook, the cloud computing market is expected to grow from $239 million in 2009 to $620 million by 2014. Software-as-a-Service and Platform-as-a-Service solutions are expected to have the highest Compound Annual Growth Rate (22 percent) because they can be leveraged to address security issues, scalability and existing IT resources, said Deniece Peterson, Industry Analysis Manager at INPUT, in an e-mail.

Other emerging technologies mirror the federal report in many aspects, where open source software and visualization are expected to increase ten percent and eleven percent, respectively. Meanwhile geospatial technology is projected to grow seven percent over the next five years. Combined demand for these technologies by state and local government agencies will increase from $1.4 billion in 2009 to $2.4billion in 2014, a 5-year CAGR of 12%.

Key market drivers include updated FISMA legislation, healthcare reform, energy, transparency and open government mandates, according to Ms. Peterson.

“We believe that the updating of Federal Information Security Management Act (FISMA) legislation will have an impact on all of these technologies,” she said, indicating that state and local governments will look both to federal standards as well as set their own. “We anticipate stricter security standards from this legislation that will address some of the security concerns that are top of mind for federal IT managers across all of these technologies.”

Despite being a relative unknown, if healthcare reform includes expanded oversight and healthcare administration on the state and local level, most of the technologies on this year’s list will be instrumental. Technologies such as virtualization, service-oriented architecture and cloud computing could be used to leverage existing IT resources and reduce the amount of new investments, Ms. Peterson indicated. Another area where expanded oversight could lead to increased technology investments for state and local governments is through transparency and open government mandates.

The Obama Administration’s Open Government Initiative and the Recovery Act’s reporting requirements will have broad implications for state and local governments within the next five years, according to Ms. Peterson. “[F]ederal mandates to open up government data and increase accountability through reporting will drive growth in cloud computing, storage virtualization and geospatial technologies.” And a major driver of geospatial technology growth will come from requirements to share more data with citizens, she said.

Another driver of these emerging technologies is energy. Energy distribution, storage, and consumption will be a complex issue facing local governments for years to come. Again, cloud computing and virtualization stand to gain the most over the next five years as governments look to address climate and energy concerns. “Energy is an area of future growth that will drive virtualization and cloud computing at all levels of government. Data centers are notorious for high energy consumption, and virtualization helps minimize the state and local carbon footprint,” Ms. Peterson said.

To read a report overview, click here.

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