State & Local: Finding Growth in a Moderating MarketPresented to GovMark CouncilOct, 2nd, 2008

Rishi SoodVice President, Government

Gartnerrishi.sood@gartner.com

2© 2006 Gartner, Inc. All Rights Reserved.

Presentation OutlineState & Local Market Environment•Major Headlines

•Market Segmentation and Solutions Map

•Four Maxim Orientation

Key Technology Issues•User Data: Major Business Issues

•User Data: Leading Technology Priorities

•Leading Agency Solution Summaries (A/F, HHS, PS/J, TR)

•Major Solution Dynamics

IT Forecasts and Major Vendors•Total IT Spending

• IT Spending By Agency

•Competitive Landscape

•Agency Scorecard Evaluation

•SLG Opportunity Map

3© 2006 Gartner, Inc. All Rights Reserved.

State & Local: Major Headlines

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Economic Slowdown Impacts SLG

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New Governors, New Strategies

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Federal Transfers on the Decline

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Budget Imbalances Driving Priorities

SLG Key Issues Government still represents second-largest

vertical market SLG Elections can represent new direction While horizontal opportunities provide new

business, agency domains unlock market Solutions orientation trumps technology

4© 2006 Gartner, Inc. All Rights Reserved.

State & Local Government:Market Segmentation

A/F TR PS CJ HHS NR PW OT

•Admin. & Finance

•Tax & Revenue

•General Services

•Budget

•Assessor’s

•Treasury

•Transportation

•Roads

•Motor Vehicles

•Ports

•Public Safety

•Sheriff’s

•Police

•Fire

•Criminal Justice

•Courts

•Corrections

•Probation

•Parole

•Health

•Human Services

•Social Services

•Youth Services

•Human Resources

•Labor

•Worker Comp.

•Natural Resources

•Environment

•Conservation

•Land

•Water

•Forestry

•Public Works

•Interior

•Other Agencies

•Economic Development

Governor/Mayor

Legislature City Council

Decentralized Market

•50 states

•3200+ counties

•19000+ cities

Source: Gartner Dataquest

5© 2006 Gartner, Inc. All Rights Reserved.

State & Local Government:IT Solutions Map

A/F

•Int. Tax Systems

•Financial Mgmt.

•Purchasing

•Records Mgmt.

•HR Systems

•Retirement

•311

•Other

HS

•Case Mgmt. Systems

•Eligibility Assessment

•Fraud Detection

•Child Welfare

•Child Care

•Child Support

•UI Systems

•WC Systems

•Other

HL

•Medicaid

•WIC

•Electronic Lab Systems

•Disease Surveillance

•Records Mgmt.

•BioT Info. Systems

•Environ. Health

•Other

PS

•CAD

•RMS

•Biometrics

•MDTs

•Mugshot

•Crime Analysis

•Video Surveillance

•Mass Notification

•Other

CJ

•CJIS

•Jail Mgmt.

•Inmate Tracking

•Jury Mgmt.

•Court RMS

•Court Automation

•Other

TR

•ITS

•CAD/CAE

•Fleet Mgmt.

•Driver’s License

•Vehicle Registration

•Project Mgmt. Systems

•Port Security

•Other

PW

•GIS

•Project Mgmt.

•Operations Mgmt.

•CAD

•HR Systems

•Other

NR

•GIS

•Permitting

•Envir. Systems

•Water Resources

•Forestry Mgmt

•Land Mgmt.

•Hazard Waste

•Other

Source: Gartner Dataquest

6© 2006 Gartner, Inc. All Rights Reserved.

State & Local Government: Market Environment

Key Issues

•Continued impact of budget imbalances

•Renewed Focus on Cost Containment/Avoidance

•New CIO Structures

•Increased demand for performance management, data analytics, BI tools

•Hot Agency Segments: Health, Human Services, Transport.

Major Impacts

•Accelerated/Uneven Demand

•Four Maxim Planning

•SLG Elections

Key Outliers

•Length/Depth of Economic Slowdown

•Future Fiscal Issues (Health, Pension, State Specific)

7© 2006 Gartner, Inc. All Rights Reserved.

STV: The New Maxims of SLG

1. Cost Containment 2. Cost Avoidance

3. Revenue Maximization 4. Revenue Generation

•Financial Mgmt. Systems (ERP)

•Budget Projection & Decision-Making Tools

•Outsourced Services

•Eligibility Verification & Fraud Detection

•Medicaid Cost Recovery

•Technology Consolidation

•Integrated Tax & Auditing Sys.

•Toll/Ticket Collection Services

•HHS Reimbursement Practices

•Web Self Service

•Economic Development Services

•Privatization of Gov Assets

Source: Gartner Dataquest

8© 2006 Gartner, Inc. All Rights Reserved.

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0

6.8

6.0

5.0

3.8

3.6

Reduce Operational Costs

Enterprise Focus

Increase Collaboration

Program Accountability

Outsource Noncore Processes

Question: What is the level of priority for each of these business issues for your organization (scale 1-7, with 7 = highest priority, 1 = lowest priority)?

State & Local: Priority of Major Business Objectives

Source: Gartner Dataquest

9© 2006 Gartner, Inc. All Rights Reserved.

State & Local: Technology Ratings

6.0

5.8

4.8

4.8

4.8

4.6

4.6

4

0 1 2 3 4 5 6 7

Security

ERP

CRM

Wireless

Business Intelligence

VOIP

Biometrics

Open Source

Q: What are the most important technology priorities for your organization (7=most important, 1=least important)?

Source: Gartner Dataquest

10© 2006 Gartner, Inc. All Rights Reserved.

State & Local : Technology Opportunity Areas

Mid Term Business Intelligence & Video Fraud Detection/Compliance Federal Impacts: Public

Safety, Transportation/DMV, Health

Long Term Major Agency Transformation SaaS, App Outsourcing, and

Utility Computing Web 2.0 & Government

Short Term Infrastructure: Centralization,

ITO, and Networks BPO: Medicaid, Eligibility, Toll Solutions: HS Case, ERP, Tax,

and Agency CRM

11© 2006 Gartner, Inc. All Rights Reserved.

Agency Snapshots: Key IssuesTax

State & County Driven

Rich Agency: Central Revenue Source

KI: Integrated Systems

KI: Audit/PM

KI: BPO Extensions

Messaging: Maximize revenue collection, investigate new sources, automate/privatize services

Transportation

State Driven Opportunity

Rich Agency: Fed Funding & Gas Tax

KI: ITS Reauthorization

KI: Real ID Act/Biometrics

KI: Port Security

Messaging: Improve transport funding models, intermodal connectedness, new terrorism requirements, next generation driver’s license

A/F

State, County and Local Opportunities

Rich Agency: Main IT shop

KI: IT Governance

KI: Focus on Rationalization

KI: ITO Leader

KI: On-Going ERP & New CRM investments

Messaging: Citizen Centric Services, Operational Efficiency, Four Maxims

12© 2006 Gartner, Inc. All Rights Reserved.

Agency Snapshots: Key IssuesPS & J

Local Gov Driven Market

Rich Agency: e-911, Crime, and New Court Fees

KI: Interoperability & Fusion

KI: Major Cuts to Fed Funding & DHS twilight

KI: Increased video surveillance and biometrics

Messaging: Save Lives, Business Process Centric, One Data, Video, Video, Video

Health

State Driven Opportunity

Poor Agency: Limited funds outside of Medicaid

KI: Medicaid Modern. & MITA Certification

KI: Greater CHIPs Roll-out

KI: New EMR Technology

Messaging: Reduce operational costs, increased prevention, integration with Homeland Security

HS

State Driven & County Operated Opportunities

Rich Agency: Major Federal Matching Funds

KI: SACWIS, TANF, Entreprise Case

KI: New Fed Matching

KI: Eligibility BPO

Messaging: Fraud Detection, Case Efficiency, Outcomes and Policy Driven Implementation

13© 2006 Gartner, Inc. All Rights Reserved.

Major Solution Priorities by Agency

Admin./Finance•Core: ERP

•Growth: Integrated Tax, Retirement, 311 Systems

Health•Core: Medicaid & WIC

•Growth: Bioterrorism & Disease Surveillance

Human Services•Core: SACWIS, UI, WC

•Growth: Enterprise Case, Eligibility, Fraud Detection

Transportation•Core: ITS and Driver’s Licenses

•Growth: Port Security

Public Safety•Core: CAD, RMS, MDTs

•Growth: Remote Video Surveillance, Mass Notification

Justice•Core: CJIS and Inmate Tracking

•Growth: Court Case Management, Court Automation

Source: Gartner Dataquest

14© 2006 Gartner, Inc. All Rights Reserved.

State & Local GovernmentTotal IT Spend, 2008-2010

$57.7

$54.5

$51.5

$44.0

$46.0

$48.0

$50.0

$52.0

$54.0

$56.0

$58.0

$60.0

$62.0

2008 2009 2010

In US $ BillionsSource: Gartner Dataquest

15© 2006 Gartner, Inc. All Rights Reserved.

Total IT Spend By Agency, 2008

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

2008 $10.3 $9.1 $7.8 $7.8 $5.6 $4.9 $2.3 $2.2 1.1

AF HS TR PS HL CJ PW NR OT

Source: Gartner Dataquest

16© 2006 Gartner, Inc. All Rights Reserved.

Top SLG Vendors

Source: Gartner Dataquest

Arrow indicate momentum

SLG

1. ACS

2. IBM

3. Accenture

4. EDS

5. Unisys

6. Northrop Grumman

7. CGI-AMS

8. Deloitte Consulting

9. BearingPoint

10. Maximus

17© 2006 Gartner, Inc. All Rights Reserved.

State & Local GovernmentGartner Views

Short Term View

Bottom Line

Long Term View

•Four maxim methodology will continue to be an important framework to prioritize technology projects•Agency modernization and new solution implementation represent key initiatives in targeted segments: Human Services (Case), A&F (ERP, Tax), Health (Medicaid, CHIPs, HIEs)

•Additional growth will be driven by Public Safety (Remote Video, Mass Notification), Transportation (License, ITS), and ITO/BPO expansion•Looming fiscal issues and lack of clarity in federal funding represent a potential obstacle to continuous growth

•State & Local Government is an excellent vertical market, with loyal client base, large scale modernization requirements, and relative transparency in funding.•Repeatability of solution offerings represents major margin opportunity within the State & Local Government market.•Access to CXOs continues to be a key differentiator in vendor penetration and success

18© 2006 Gartner, Inc. All Rights Reserved.

SLG Major Agency Scorecard

Agency Size Growth Major Solution Activity

Vendor Match

A/F & Tax

Human Services

Transportation

Public Safety

Justice

A+

Health

Public Works

A

B+

B+

C

C

D

B

A

B+

B+

A

B

C

High

High

High

Medium

Medium

Medium

Low

High

Medium

Medium

High

Medium

High

Medium

Source: Gartner Dataquest

19© 2006 Gartner, Inc. All Rights Reserved.

SLG Solution Opportunity Map

Vendor Addressable Factor

Mar

ket

Op

po

rtu

nit

y In

dex

Target OpportunityExpansion Opportunity

Adjacent OpportunityNon-Aligned Areas

HR

FinancialsRetirement Systems

Inspection Mgmt.

Permitting Sys.

Environmental Sys.

Records Mgmt.

MDTs

Identity Mgmt.

Fusion Centers

Video Surveillance

Tax Assessments

HS Case Mgmt.

Disease Surveillance

CJISCourt Automation

Drivers License

ITS

County 311

20© 2006 Gartner, Inc. All Rights Reserved.

SLG Vendors: A Path Forward

Four Maxim Orientation

Targeted Acquisitions

Rich Area Modernization

Building Standardization

New Tech Models

Back to Transformation

Time

21© 2006 Gartner, Inc. All Rights Reserved.

Recommendations

Remain Focused: Utilize targeted tiering, agency, and partnering approach to enhance market presence

Build Strategy, Then Operate Tactically: Once strategy is defined, vendors should focus on specific agencies/ jurisdictions that will deliver the greatest impact

Solutions Orientation: Vendors must align their technology into major solutions areas that resonate with government CXOs

Changing Competitive Landscape: Major acquisitions, COTS extensions into agencies, rise of new technology acquisition models, etc. provide significant change in competitive positioning and partnering