Don't Let the Budget Drama Fool You, California Still Has IT Money to Spend

In the early days of cloud computing, convincing government IT leaders that they should be taking a new approach to storing data was an uphill battle. The process took more than a decade before cloud was widely regarded as a legitimate option for the public sector.

The same cannot be said of new technologies like artificial intelligence, according to Center for Digital Government* Chief Innovation Officer Joe Morris, who added that the pace of technology has quickened to the point that agencies must be able to respond quickly and thoughtfully to these new tools.

“Looking at generative AI, how quickly that went from a shiny object, and you’re kind of just dazzled by it, to real-world applications in the public sector — that adoption curve is rapidly shrinking,” he told attendees of the State of Technology — California Industry Forum recently in Sacramento.
“We're not talking about 10 years of conversation. We're coming from like, here's this really neat, great thing that's happened to us all at the same time, industry and government together, embracing them. To me, that is one of the biggest changes that I'm seeing, typically now, over the last 18 to 20 months,” he added.

This rapid pace of technology adoption and evolving service expectations raises a lot of questions about what lies ahead for those who sell to the public sector. Among those questions: where to focus the limited sales resources.

Across all levels of government, priorities remain fairly constant. State-, county- and city-level CIOs all report that cybersecurity remains a top concern, followed closely by either providing a positive customer experience or addressing workforce challenges. Things like modernization efforts, broadband connectivity and automation are all over the proverbial map (as you can see from the slide below).
Some of the market challenges posed in the near term (2024-25) center on federal funding cliffs, fragmentation with regard to AI, workforce limitations, uncertainty surrounding the regulatory landscape and changes to government procurement processes.

“As we look at the workforce limitations that we're seeing in the public sector, we're going to see a greater reliance on the partnership between government and many of you in the industry to make sure that the lights can stay on, the operations remain effective,” Morris said.

On the flip side of that coin, though, are a number of near-term opportunities. Morris explained that the gov tech market will see opportunities in the areas of citizen/employee expectations, change management-as-a-service, system of records modernizations, cybersecurity and risk mitigation, workforce augmentation and experience modernization.

The doom and gloom surrounding the state’s budget deficit and resultant cuts was in no way an indication that IT spending would dry up across the state, Morris said, highlighting that as many as 90 IT projects were identified in the budget this year alone.

“I think you could look at the California state budget over the years. It's up, it's down, it's got these wild swings in it. But once you’ve gone through that — depending on the year — it fundamentally doesn't change that much,” Morris said. “Even in really challenging budget times, there's a wealth of IT contracts.”

In addition to fairly stable funding for IT projects, more than 200 technology-focused grants are available at the state and local levels.

“I think generally, despite all of the hysteria and how to see the budget, once you dig in, you see this is still an opportunity- and target-rich environment,” he added.

Many of these projects align with the broader priorities Morris pointed to in his presentation — legacy and experience modernization, cybersecurity, etc. During the course of the next 12 to 18 months, he predicts that top areas of opportunity in California will center on cybersecurity, health and human services, transportation and public safety, among others.
“The world's changing, and they see it, and everyone's responding to it,” Morris said. “It's the business side, it's not just IT. This is something where both groups are coming together, recognizing this opportunity, and we're seeing the world change, it seems like overnight.”

*The Center for Digital Government is part of e.Republic, Industry Insider — California's parent company.