The state and local government IT services market has finally reached its “app store moment,” thanks in part to the demands of the coronavirus pandemic and the need to improve service delivery and experience for citizens – and the government workforces that provide them.
That was the message from Dustin Haisler, chief innovation officer at e.Republic, who spoke on June 15 at the organization’s virtual State of GovTech 2021 event that highlighted how government technology has played a critical role in solving complex public sector problems.
Haisler explained that the “app store moment” of progress and innovation in the state and local government IT market is being driven by the democratization of cloud technology, unbundled new capabilities and applications, and increasing access to capital.
“When the iPhone was initially released, there was no app store, you had all of the same applications that came with the iPhone, those were what you were able to use, you couldn’t add anything else, there was no ecosystem around it,” Haisler said. Then Apple created its App Store the following year, and that allowed users to download simple apps – like maps and flashlights – that made people’s lives easier.
“But then something interesting happened. It opened up access to an entire ecosystem, you had a platform that became frictionless, and that allowed any developer to create new capabilities and monetize it,” Haisler said.
Instead of being stuck with the applications that were initially provided with the phone, consumers had open to them an entire new environment that allowed them to find the best of breed applications for specific challenges. Since its opening in 2008, the App Store has grown to over four million non-game applications. “And just like the App Store has matured, we’re seeing the same dynamic now happening in the government IT market,” Haisler said.
“Agencies have kind of hit this perfect storm where we’ve seen the democratization of technology infrastructure with the rise of the cloud, we’ve seen entrepreneurs that are hungry to tackle complex problems in the public sector, [and] we’ve seen government agencies that want to tackle those same problems and reimagine the way that they deliver services, not just in responding to a pandemic but for everything,” he said.
State and local government agencies are spending more than $118 billion a year on information technology and services, and that figure is growing year over year.
The state and local IT government market now represents a new opportunity to reimagine what’s possible, Haisler offered. “You’ve got all of this happening simultaneously along with investors that have brought new capital to the table to help scale companies in the market. So it’s an exciting time. It’s created the perfect moment for government agencies, startup companies, academia, and investors to come together and to figure out how do we do this, how do we take it to the next level,” he said.
Infrastructure Driving Change
Drilling down on some of these ripening developments, Haisler first pointed out how IT infrastructure has changed.
“We’ve democratized our infrastructure,” he said. “It no longer needs to be inside of a government agency, and now cloud infrastructure and hybrid cloud environments and SAAS delivery models have enabled government agencies to not have to be in the business of maintaining and building infrastructure, but building capabilities on top of that infrastructure.”
At the same time, Haisler pointed to the loosening of procurement rules and regulations. “I mean, thinking back a decade ago, you couldn’t legally procure a cloud service, because we had on-premise data requirements that prohibited agencies from keeping data outside of their own environment and control. Now those restrictions have been loosened and in fact the pandemic has accelerated it,” he said.
Then there’s the ascent of new government leaders and service delivery models that help agencies realize the potential of new technology by working with private sector partners and others in the ecosystem to solve some of their most complex challenges. “So new CIOs realize they’re not in the business of infrastructure or maintaining infrastructure, but that they want to build capabilities, and innovations on top of that infrastructure,” Haisler said.
Government leadership, he said, is increasingly looking at new ways to deliver services, and a major driver is bringing benefit to the citizen layer, he continued.
“There are so many new expectations. You always hear about the Amazon expectation – that people want a one-stop shop when it comes to how they view government services and government service delivery,” he said. Those expectations are driving new requirements for public sector agencies because no one wants to take a day off to wait to have their driver’s license renewed anymore. “They want to be able to set up an appointment online. They want to be able to do the entire process online,” Haisler said.
Capital Flows
Helping to push these developments is the attraction of more entrepreneurs that are targeting the market segment as a focus area. “Government was always kind of an adjacent area that could be for future expansion, but it was so complex to break into, you had to be on state contracts and vehicles, know the right people, at the right time. But that is all changing as well,” Haisler said.
Agencies are looking at imaginative pilots and finding innovative ways to tap into entrepreneurs, Haisler said. “We’re seeing the rise of a new class of entrepreneurs that are interested in government technology and building capabilities for this market,” he said.
Capital has always been a significant roadblock for many companies wishing to grow in this marketplace, especially with the necessary capital required to scale across the country. “This is why initially we saw a lot of local government IT companies that were successful had to stay regionally focused,” Haisler said. “Now with available capital both from pre-seed and on to more mature strategic funding rounds, this has opened up the door for expansion, for growth and for all kinds of new market dynamics that weren’t possible before.”
Pandemic Fallout
Finally, there is the impact of COVID-19 that worked to accelerate the dynamics that were already taking place. “A common thread that we heard from state CIOs and local CIOs was that they did a year’s worth of work in a matter of months, and the same is true for the market dynamics itself,” Haisler said. “COVID accelerated the government IT market maturity, it showed that this was no longer just a sub-area of government, something that only a few niche companies could be in.”
The pandemic also required that all state and local government agencies play more expansive roles, he explained. “When you think about what happened especially back, right after things were starting to shut down, where did you go for information? Where did you go to ask questions? Well, that was probably a local government agency, your city, your county, or your state.”
As a result, many citizen-facing systems were overwhelmed including call centers and especially large scale unemployment insurance systems. “So we saw the needs of government became more important than ever, the scalability of that foundation became more important than ever, agencies had to focus on being designers, enforcers, communicators, employers, service providers, all of these different capabilities simultaneously,” Haisler said.
