Government IT spending on the rise, report says

Despite slow fiscal growth in government, IT sales are growing in this area at a higher rate than other industries. Here's how your company could get in on the new business.

Image: iStockphoto/spaxiax

Government IT spending continues to grow, despite tight budgets, according to a new report from Onvia. And while large federal tech contracts tend to gain the most attention, it's actually state, local, and education (SLED) government agencies that make up the majority of formal, advertised bids and request for proposals--offering opportunities for IT vendors of all sizes to gain government contracts.

Tech firms are experiencing more growth in the government sector than are other industries, according to the report The State of Government IT, released Tuesday. Some 57% of SLED IT vendors reported increases in their government sales in the past year, compared to just 38% of SLED vendors from other industries.

Further, IT companies expect a larger increase in government sales in the coming year compared to companies in other sectors. In surveys of government contractors and agency procurement officials, respondents said the following contributed to their government IT sales increases:

  • Deploying more sales resources
  • Offering new/better products
  • Planning to add more value
  • Shifting toward ongoing or renewable contracts

"IT is one of the larger and more dynamic sectors in government contracting," said Paul Irby, a business-to-government market analyst, in a press release. "State, local and education agencies spend tens of billions of dollars in IT each year, and while federal IT contracts may grab headlines, those issued by SLED agencies make up nearly 68 percent of formal competitive bids."

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The overall government IT market is experiencing slow, steady growth, the report stated. However, areas such as cybersecurity, mobile, open data, cloud and business intelligence are growing more rapidly.

Most IT vendors report selling to both the SLED market as well as to federal agencies. Rather than specializing in only one state or local market, vendors tend to look for deals across the levels of government.

Hardware and electronic products continue to be the largest category of government IT purchasing. But it should also be noted that 46% of bids are in services or telecom, including a sizable share of consulting and implementation work, the report stated.

A large recent trend for SLED agencies is known as efficient purchasing, which involves using nontraditional methods such as co-op, piggyback, and statewide master contracts to make needed purchasing without having to go out for a new, formal competitive bid process each time. Though many IT vendors only compete for traditional bids, tapping into these nontraditional contracts can add revenue and offer another way into the SLED market.

Most IT vendors serving the SLED marketplace are growing their government business and outpacing other industries, the report found. As mentioned above, the 10 largest SLED IT vendors (based on volume of contracts) only win about 15% of the awards combined. Therefore, 85% of awards are going to small to midsize businesses, the report stated.

"This research challenges misconceptions that government IT is only for large players in the Federal space," said Alberto Sutton, senior vice president of marketing at Onvia, in a press release. "Technology in government opens the opportunity for vendors of all sizes at all levels of government, and government buyers are challenged to keep up with new and emerging technologies such as cybersecurity and cloud."

The 3 big takeaways for TechRepublic readers

  1. Despite slow fiscal growth in government, IT spending remains strong, especially in areas such as cyber security, mobile, open data, cloud and business intelligence, according to a new report from Onvia.
  2. The ten largest state, local, and education IT vendors only win about 15% of the awards combined; the majority of contacts go to small to midsize businesses.
  3. More than half of state, local, and education IT vendors reported increases in their government sales in the past year, compared to just 38% of such vendors from other industries.

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