Local government IT solutions: Proven ROI, consolidation projects win

There are bright spots in the local government IT solutions market; projects getting green lights include those that consolidate and have proven ROI.

While the gradual economic recovery bolsters some market segments, the local government IT solutions market continues to feel the pinch.

Detroit's July 18 bankruptcy filing underscores the fragility of municipalities. The city, with an estimated $18 billion in debt, is reckoned the largest U.S. city to declare insolvency. The city's financial problems represent the extreme end of economic hardship spectrum. Opinions differ on the health of the sector as a whole.

Gina Rudd, director of research at CJIS Group, a Herndon, Va., company that tracks state and local government IT projects, said IT spending has declined as local governments suffer.

"It does seem like more and more governments are struggling to stay afloat," Rudd said.

Pew's American Cities Project reports that 24 of the top 30 U.S. cities saw assessed property values decline from 2009 to 2011. Property taxes based on those assessments is an important source of local government income. While local governments typically respond to property value declines by raising property tax rates, a combination of property tax bill defaults and foreclosures has diminished local government revenue. 

Jake Freivald, vice president of corporate marketing at New York-based Information Builders, said the strength of the local government market can vary widely from place to place. Information Builders provides business intelligence software and partners with the channel on larger city projects.

"The market itself is pretty spotty right now," he noted.

Some channel executives, however, see some signs of improvement in the local government IT solutions market.

Tony Sivore, senior manager for state and local government at IT solution provider CDW-G, which is based in Vernon Hills, Ill., said spending restraints have loosened a little bit, noting that market conditions have improved somewhat compared with the last few years.

"Cities and counties are getting more savvy in where they put their money," Sivore said.

According to Sivore, government agencies have become more selective in the types of IT projects they pursue. The key deal maker: initiatives with a proven return on investment.

Freivald added that agencies do indeed spend on projects that boost efficiency and promise a solid return. He summarized the thinking among local government buyers: "If I spend $150,000, it had better save me $1 million."

Consolidation and cloud

The need to save money encourages enterprise-wide IT projects, Rudd noted. Cities that once ran individual human resources systems in each municipal department now look to purchase a single, integrated enterprise resource planning (ERP) system, she explained.

"More projects are being completed as consolidation efforts," Rudd said.

David Smith, director of state and local government for the public sector at Santa Clara, Calif.-based Citrix Systems Inc., said consolidation projects seem to have the highest priority among governments at the moment. He said central IT departments are gaining influence among local governments looking for one organization to provide shared services, versus having each city government agency run its own IT shop.

Smith said a shared services organization may offer everything from email to SharePoint hosting to storage and backup -- commonly used services across all agencies. Citrix works with channel partners, many of which are regional firms that serve as IT advisors to their local government clients, he said.

In addition to consolidation, local governments frequently turn to cloud computing and Software as a Service (SaaS) applications.

Predictive policing applications pull together data from booking systems, court systems and other information sources to help predict where crimes are most likely to occur.

William Taylor, director of storage services at The Aldridge Company, a Houston-based technology management, consulting and outsourcing company, said he has encountered that trend.

"Email is the first thing that moves into the cloud," he said, citing government interest in cloud offerings such as Microsoft's Office 365.

Taylor said local government IT departments may, eventually, also move file servers to Windows Azure or another cloud system. He said it remains unclear whether municipalities will move some of their core city functions, such as geographic information systems, to the cloud.

Rudd said she sees interest in a range of cloud-based applications. Local governments, she said, are purchasing more and more SaaS-based or hosted solutions as opposed to on-premises products. She said such government IT solutions may end up costing more in the long run, but they let customers avoid the steep up-front cost of traditional software applications.

"It's a little bit at a time versus a huge chunk at one time," she said of cloud spending.

Rudd cited a range of SaaS and hosted systems in demand in areas including ERP, human resources, electronic tax filing, and computer-aided dispatching systems for public safety answering points.

Doing more with less

A common theme among local government IT departments is the need to do more with less. That expression has become more than a little clichéd, but chronic short-handedness has become the norm in many city and county IT shops. Channel executives said numerous IT personnel across the public sector are retiring. Governments don't always replace the outgoing staffers.

As a consequence, city IT departments are looking for ways to manage IT resources and users with fewer administrators. One such approach is desktop virtualization, which centralizes users' desktop images in the IT center and reduces the need for desk-side support.

Taylor said he has seen an uptick in virtualized desktops projects this year. He noted that most city IT departments are expected to work at a higher level of efficiency than what's typically the rule in the corporate world. Taylor said desktop virtualization technology is not an inexpensive proposition, but such deployments let IT personnel re-image a machine, fix problems and roll back issues clients are having.

Desktop virtualization, in turn, has created demand for disaster recovery projects. With desktops centralized in IT, the data center directly affects the productivity of government workers, Taylor explained.

"The infrastructure for desktop functionality has to be high availability," Taylor said.

Data analytics

Local government IT departments are starting to adopt big data and analytics solutions to give them an edge. Freivald pointed to the example of predictive policing. Such business intelligence applications pull together data from booking systems, court systems and other information sources to help predict where crimes are most likely to occur. This helps police departments more effectively deploy resources, Freivald said.

Information Builders initially rolled out predictive policing in Richmond, Va., and has since expanded into other cities.

Sivore said big data has become top of mind for governments that view data mining as a possible source of revenue. Jon Mazella, public sector sales manager for CDW-G, said governments are using the technology to identify tax fraud. He said some sort of revenue-related project initially draws public sector customers to big data.

"They use that as the beachhead into big data," Mazella said. "Once they make the first project successful, they will expand out and find other uses."

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