Transcript About INPUT

Turning the Economic Crisis to your Advantage:
Selling to State Governments
Jason Sajko
Senior Analyst
INPUT
[email protected]
@jsajkoINPUT
Tiwttier Hashtag: #INPUTgov
April 22, 2010
Confidential & Proprietary
For Internal Use Only
Confidential & Proprietary
For Internal Use Only
INPUT Services
INPUT provides market intelligence, analysis,
events and training
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Market Intelligence – federal, state and local intelligence, web
based opportunity tracker, contacts and organization charts
Industry Analysis – develop in-depth, holistic plans for federal,
state, and local government markets
Events – INPUT Executive Breakfasts and Seminars offer
insight and networking opportunities with top policy and
decision makers
Training – provides you with the knowledge to effectively
operate and pursue opportunities in the government market
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2
Fundamentals
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3
The S&L Market Fundamentals
Large, Fragmented, Diverse Market
• Must focus efforts on high-potential targets
Budget Processes and Calendar Dictates Business
Development Timeline
• Unless you luck into year-end spending, you need to be
patient – forecast accordingly
• Federal grant programs can fund technology projects
Purchasing Rules and Regulations Vary
• It’s critical to know and follow them
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4
The S&L Market Fundamentals (2)
Power of CIOs Varies
• Deputy CIOs are often more tenured
• When you meet them, be prepared
Common Approach to Marketing is Ineffective
• Build rapport
• Focus or find your niche
• Direct or indirect or both?
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5
State Revenue Conditions
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6
2008-14 State & Local Revenue Scenarios
Total Annual S&L Revenue Collections
2.0
1.8
2003-2007 CAGR*
1991-2003 CAGR*
Total Revenue ($B)
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
2008
2009
1010
2011
2012
2013
2014
*Note: CAGR = Compound Annual Growth Rate
Sources: INPUT
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7
Rate of Decline in Year-over-Year (YOY) S&L
Revenues Slows in Q3/2009
Down 3.5% YOY in Q3/2009 (versus
down 7.9% YOY in Q2/2009)
Up 3.3% YOY in Q3/2009
All Other Taxes &
Fees, 18.6
Property Taxes, 29.9
Income Taxes, 25.4
Personal income tax
collections down
11.8% YOY in Q3/2009
(versus down 27.0%
YOY in Q2/2009)
General Sales Taxes,
26.1
Collections down
8.9% YOY in Q3/2009
(versus down 8.8%
YOY in Q2/2009)
% of Total Annual Collections
Sources: U.S. Census Bureau and Rockefeller Institute of Government (as of 11/23/09)
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8
State Unemployment Rates
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Regions Doing Better Than Average
Great Plains and Upper Midwest
• Lowest foreclosure rates
• Sparse population prevented rampant price inflation
• Energy resources:
• Oil, natural gas, wind, water, and ethanol
• They do better when fuel prices are up at the pump
Mid-Atlantic and Northeast
• Impact of foreclosure crisis has been blunted
• Diversified “megaplex” metro economies
• Surging finance industry profits are spent here
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Regions doing worse than average
Great Lakes and Southeast
• Most dependent on manufacturing
• Hit hard by downturn in consumer spending
• Downturn leads to layoffs and off-shoring of labor
• Lost jobs = lost homes
Florida and the Far West
• Biggest run-up in housing prices
• Most overbuilt commercial real-estate markets
• Recreation-based economies slide with declining tourism
• CA & FL depend on family entertainment attractions
• NV depends on gambling attractions
• CA tech/movie industries struggle with credit crisis
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11
State unemployment rates, 12/2009
WA
VT
MT
ME
ND
OR
MN
ID
NH
WI
SD
WY
IL
CO
KS
CA
AZ
MA
PA
IA
NE
UT
NY
MI
NV
OK
NM
WV
VA
KY
NC
TN
AR
SC
AL
DC
< 4.0
4.0-4.9
CT
5.0-5.9
NJ
6.0-6.9
DE
MD
7.0-7.4
7.5-7.9
GA
8.0-8.9
LA
FL
AK
RI
OH
IN
MO
MS
TX
%
9.0-9.9
10.0-10.9
> 10.9
HI
Note: The unemployment rate in 12/2008 was 7.4%. This map shows the states
that are doing better (green) or worse (brown) than that rate one year later.
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Source: U.S. Bureau of Labor Statistics
(as of 01/22/10)
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Addressable S&L IT Market, 2009-2014
CAGR – 3.9%
Source: INPUT
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13
Federal Budget for FY 2011
Grants-in-aid to S&L to peak in 2010
• 2009: $538.0 billion
• 2010: $653.7 billion ($115.7 billion over 2009 level)
• 2011: $645.7 billion ($8.0 billion below 2010 level)
• Decline due to expiration of stimulus fiscal relief
• Extends federal match of 67% of Medicaid to 06/11
• 49% of all aid is for health care ($317.6 billion)
• 19% for income security (e.g., food stamps, housing)
• 13% for education, training, and social services (incl.
unemployment insurance trust fund)
• 11% for transportation
• 2011 includes $67 billion in unallocated funds for jobs
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14
State Budget Conditions
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States Face More Deficits for FY 2011
Deficit as a % of
State General Fund
-15.1% or higher
State(s)
AK, AZ ($2.5B), CO ($1.8B), CT ($4.7B), FL ($4.7B), IL ($12.8B), IA ($1.1B), ME ($1.0B),
MD ($2.0B), MN ($4.0B), NV ($1.3B), NH, NJ ($8.0B),
NC ($4.4B), PA ($4.1B), VT, WI ($3.4B)
-10.1% to
-15.0%
CA ($14.4B), HI, MI ($2.7B), MS, NY ($6.8B), OH ($3.2B), OK, OR ($2.1), UT,
WA ($2.1B)
-5.1% to
-10.0%
GA ($1.0B), KY, MA ($2.2B), NE, NM, RI, SC, TN ($1.0B), VA ($1.3B), WY
-2.6% to
-5.0%
KS, WV
-0.1% to
-2.5%
IN
No Deficit/
[Unknown]
[AL]
Source: Center for Budget and Policy Priorities (as of 12/23/09)
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State actions for FY 2011 budgets
State
NY
FL
CA
Major Spending Cuts
Major Revenue Increases
• 5% less state aid to schools
• Closing 8 mental health
wards
• 92% of cuts recurring
• Limit budget growth to 0.6%
• $1 billion in taxes/fees
- Wine in groceries
- Tax on corn syrup
- Higher cigarette tax
- Health care provider tax
• Gov. Crist and the state legislature are at odds.
• Crist forecasts mild economic recovery, growing revenues, and
tax cuts.
• Legislature sees extreme budget cuts.
• K thru 12 teacher layoffs will be the friction point.
• Governor has offered major cuts to prisons, health services,
transportation, education, and the environment
• Budget proposal rolls state spending back to 2004
• Legislature is sworn to defend social services, raise taxes.
• Governor and legislature headed toward usual showdown
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The Who of S&L
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Who to pay attention to?
Governors
CIOs
Procurement
Citizens
Teaming partners
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•
•
•
•
Large Players working in all 50 states
Local Players
Small and Disadvantaged Businesses
Technology/Application partners
Resellers
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Gubernatorial Election Cycle
Source: National Governors Association (NGA)
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State CIO Priorities
2010
2009
2008
2007
2006
State CIO Priorities (NASCIO)
1
3
--
--
--
Budget and Cost Control
2
1
2
3
2
6
3
--
Shared Services
4*
--
--
--
--
Broadband and Connectivity
5*
--
--
--
--
ARRA
6
4
2
1
1
Security
7
8
--
--
--
Transparency
8
--
--
--
6
Infrastructure
9
9
5
6
8
Health IT
10
10
8
22
5
Governance
Consolidation
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State CIO Priority Technologies
2010
2009
2008
2007
2006
Priority Technologies (NASCIO)
1
1
1
7
--
Virtualization (storage, computing, data
centers)
2
4
7
3
3
2
8
--
--
Document/Content/Email management
4*
--
--
--
--
Cloud Computing, SaaS
5
--
8
4
--
Security enhancement tools
6
3
5
2
--
ERP/legacy application modernization
7
8
4
5
2
Geospatial analysis and GIS
8
9
--
--
--
Business Intelligence and analytics
applications
9
7
6
1
--
Identity and access management
10
5
--
--
--
Social Media and Networking
Networking, Voice and Data, Unified
Communications
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Conclusions &
Recommendations
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Key Take Aways
You Can’t Be All Things to All Governments
Join Associations and Get Involved
Politics Matter
Align to Priorities
Look for Opportunities that Can be Replicated
• Driven by federal mandates or funding
• Functions all governments perform
• Compelling “pain”
Be Committed to the Long Haul
• Governments know which companies come and go
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INPUT’s Take
The fiscal condition of the states and localities will
slowly improve so long as…
1. The federal government continues to underwrite the
housing market
2. The federal government provides direct fiscal relief
via…
• Increased benefits funding for Medicaid and UI
• Build America Bonds (BAB) for infrastructure
• K-12 education grants
• Unlimited student loans for higher education
3. The unemployment rate begins to decline by mid-2011
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Recommendations
IT spending has no where to go but up
• CIO.com report (Sept. 2009):
• 37% of CIOs anticipate increased spending
• Up from low of 14% in May 2009
• Down from high of 49% in July 2008
• Good indicator that we’re at the O&M “bottom”
S&L layoffs will lead to IT-driven efficiency
• Furloughs and IT consolidation are small fry savings
• Remaining workers will be more burdened than ever
• BI is needed for performance management
• First wave of real business-process re-engineering
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Questions?
Q&A
 Jason Sajko
 [email protected]
 @jsajkoINPUT
 Twitter Hashtag: #INPUTgov
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