Modernization

Projected federal IT shrinkage offset by state and local growth

Over the next two years, Forrester says state and local agencies will spend the same or more on software in all categories, particularly cloud-based products.

By Colin Wood

February 13, 2017

Federal IT investment will not keep pace with the annual 2 percent to 3 percent growth seen in recent years, while IT spending at the state and local levels is expected to grow, according to a Forrester report published Wednesday.

As the Trump administration prepares to expand spending on defense and infrastructure, it is expected to work with the Republican-led Congress to cut spending elsewhere. Overall federal technology spending is projected to decrease by 0.1 percent in 2017 and 0.6 percent in 2018, according to the report. Any technology to be found in Trump’s $137.5 billion stimulus proposal containing at least 50 major infrastructure projects does not figure into these projections because that spending would not begin until at least 2018.

Conversely, Forrester estimates that state and local government IT spending will grow by 4 percent in 2017 and 2018, based on surveys showing that state and local decision-makers are spending the same or more on software in all categories, particularly cloud-based software. Despite government IT’s long-term growth pattern, the report notes that government at all levels continues to fall behind a private technology market driven by “customer-obsessed services.”

Government’s pattern of trailing the private sector in technology spending is particularly noticeable between 2010 and 2015, a period when data from the Bureau of Economic Analysis shows marginal growth in government contrasted with a 25 percent leap in private industry.

Key predictions cited in the report include:

Increased cloud adoption will lead government to require less systems integration.
Government will increasingly rely on contractors — technology outsource spending will grow at a rate of about 5 percent.
The Trump administration will probably not make major changes to what is now a flat planned fiscal 2017 budget.
Some federal agencies will continue to aggressively adopt the public cloud, though adoption will be uneven.
Federal spending on business technology (BT) will constitute a third of all technology spending, outpacing even local government.
State and local cloud-based software investment will see the fastest growth.

Financial growth in state and local government IT is mirrored by a community politically progressive civic technologists now finding refuge in lower levels of government, including Ann Dunkin, who departed as CIO of the Environmental Protection Agency for a job with Santa Clara County in California.

Organizers at civic innovation group Code for America validated this observation.

“Since the election we’ve seen an increase in developers, designers, product managers, and others working at top tech companies raising their hands to work at the state and local level,” said David Huebner, director of talent at civic innovation group Code for America, in an email. “What we keep hearing over and over again is that they want to use their skills to bring about real change at scale.”