The IT Market in SLED Government
IT is a large, but also fragmented market comprised of a number of evolving technology areas crossed with very different key buyer segments from state agencies to cities to school districts. Growth rates of competitive contracts do not necessarily reflect the pace of change and growth in total IT spending. This is due to consolidation and efficient purchasing, which can lead to fewer, but larger contracts, or purchases made below threshold without requiring a formal bid.
Initiatives Driving IT Growth
Onvia analyzed the areas of IT widely considered to be critical according to state agency IT chiefs along with IT buyers at the county and city levels. We then used Onvia’s comprehensive database of bids & RFPs to measure growth in these same areas to provide more insight for the businesses that sell into these markets. To select the 5 areas, we consulted the list of top 10 “State CIO Priorities” put out by the National Association of State CIOs (NASCIO). We also examined lists of “top technologies and initiatives” likely to “have an increased focus in the next year” based on the Digital Counties and Digital Cities surveys by the Center for Digital Government. Each of these “Top 10” sets of rankings were compared to identify the five areas that are generally viewed as most important. The 1-10 rankings are listed under each topic and any with a missing ranking indicates it was not highly ranked for that level of agency. The five top IT areas are:
In the 2015 Ponemon Institute survey of government IT staff, state & local government closely matches federal agencies in frequency of “material data breaches” that “compromises the organization’s networks or enterprise systems.” Only 19% of state and local IT staff rated their systems highly in the ability to prevent cyber attacks, and these agencies tend to struggle with lack of skilled personnel, insufficient funding, and lack of consistent policies. Vendor support was seen as much more important than reputation in vendor selection, pointing to a market that places a high value on service and guidance.
Onvia’s recent cyber security report shows that contracting activity for cyber related projects has nearly doubled during the 12 month period of July ’15 to June ‘16, compared with the previous 12 month period.
Trusted with safeguarding large silos of sensitive information, states are scrambling to keep up with the deluge of new threats and are worried about preventing massive and expensive data breaches as well as protecting the privacy of individual citizens.Ben Vaught, Director of Onvia Exchange
Recent State & Local Data Breaches
- Illinois (2016), up to 200,000 voter records
- Idaho, Oregon and Washington (2016), “several million” IDs exposed by a government vendor of online registrations
- South Carolina (2012), 3.6M SSN’s and 387,000 payment card numbers
Mobile is a top ranked area for both cities and counties. At the local level, agency IT staff are focused on making government services more convenient and accessible to citizens through mobile friendly websites and mobile apps that can be easily used on a smart phone.
Governments are catching up to the established trends that citizens are more likely to surf the web on their phone and tech-savvy residents have less patience for outdated user interfaces on agency websites. Increasingly, communities are in competition to attract skilled workers and promote a “digital friendly” image as a city where services can be accessed at any time, on any device. Local governments are responding with upgraded or enhanced online features and functionality.
Onvia’s database shows that mobile apps as a category has a 41% rate of growth over the past year nationwide, with several hundred formal bids and RFPs issued recently, in addition to all of the many smaller purchases made below threshold.
Open Government/Open Data
Open data is a major technology trend that involves opening up and sharing large data sets that were formerly hard to access. More than 40 countries have established open data initiatives, and a total of one million data sets worldwide have reportedly been put online for convenient manipulation or download. Local government managers have been busy looking into the requirements and potential benefits of opening up their large data sets and making them available to the public or business community. Just in the last 12 months, Onvia’s database showed respectable growth of 34% in the volume of bids and RFPs for IT projects mentioning open government and open data-related terms in the primary project document, title or description.
By the beginning of 2015, the five largest U.S. cities had open data policies and smaller cities and agencies are increasingly weighing the benefits that open data can provide. Many agencies have appointed a new “Chief Data Officer” to handle open data implementation and management. With the adoption of open data, agencies can fill an underlying need to be more transparent, collaborative and responsive to citizens and businesses. In an era of budget scrutiny, scandals, leaks, questionable outcomes and inappropriate conduct, government officials seek to increase trust, engagement, satisfaction and value by providing expanded and useful access to a broad range of data.
Cloud (private, public and hybrid) is a maturing category of technology that has been proven and widely accepted at varying levels of government over the past 5+ years, particularly for software-as-a-service. Federal and state agencies have typically been quicker to adopt cloud initiatives than local government, but a large majority of the SLED government universe has at least been seriously considering how to take advantage of the efficiencies and benefits that cloud offers.
For example, American City & County recently surveyed state and local agencies and found 43% plan on expanding private cloud use, and 32% will expand public cloud use. 33% would begin using private cloud and 23% will start using public cloud. NASCIO’s 2016 State CIO Survey found that more than 70% of state CIOs reported having “cloud first” policies “when considering new applications or looking to upgrade legacy systems.” A total of 40% had a cloud migration strategy in place for their legacy systems, with another 36% indicating a strategy was in development.
Onvia’s database shows that bids and RFPs associated with cloud software or cloud providers increased by 61% over the past 12 months among state and local agencies.
Government agencies, traditionally seen as the stewards of large silos of records but not necessarily the analysts of that data, have in recent years been looking to leverage the same types of advanced business intelligence techniques used in the private sector to solve problems, save money and govern better. As the trend toward open data continues, agencies are realizing they can now do more with the information they have access to, creating new dashboards, reporting and analysis tools.
The benefits of BI include the potential to improve resource planning or reduce waste. Agencies can also find new efficiencies through mining data across teams or departments. For example, analyzing the connections between poverty, drug abuse and crime can assist both human services and police teams in knowing where to focus attention while pointing to the most productive places to collaborate.
BI was the 4th ranked priority among state CIOs and the 10th ranked among counties. Within Onvia’s database of bids and RFPs, there was an impressive 43% increase in the volume of these projects over the previous year. This growth was split between selling BI software packages to agencies, and contracts with a larger services, consulting or outsourcing component. “BI vendors selling to government should consider the specific needs of agencies,” said Alberto Sutton, SVP of Marketing at Onvia, who previously served as an executive of a major BI vendor.
From our largest BI deployments, we learned that public sector buyers were motivated by 3 factors: a) they need greater visibility into hidden trends for data-driven decision making, b) they expect strong performance in scale, self-service analytics and ease of doing business, and c) they desire civic impact – to meet needs and help support better and more efficient government services.Alberto Sutton, SVP Marketing, Onvia
For Further Reading
Onvia’s most recent cyber security report provides an in-depth review of this top ranked area of IT. For an analysis of trends in the larger IT sector, our upcoming IT summary report will be available during the 4th quarter of this year. For trends and additional commentary on various IT topics within government contracting, see our blog.