SLED 101 Series – Understanding the IT Budget

By Rachel Eckert, SLED Market Intelligence Manager

In our last installment we walked through the budget process to help you target your customers at the right time. In this, our third installment of our SLED 101 series, we focus on IT budget distribution, state-by-state spending and the importance of engaging with the right stakeholders. This information can help you focus your sales efforts more strategically and develop more targeted account lists.

Let’s start by looking at the pie chart below with a breakdown of IT spending by jurisdiction type or level of SLED government.

IT budget distribution

For 2021, IT spending in SLED will be just north of $100B. Spending proportions and ranges will vary for each state and or local government, however, almost 40% of that spending will be done by state governments. Higher Ed, Special Districts, K-12 School Districts and Cities all sit around, 12–15% each.

To give a bit more context to the SLED spending estimate, let’s look at a heatmap of estimated IT spending by state. You can use this heatmap in conjunction with the pie chart to segment your territory even further.

State-by-state spending

States like California, Texas, Florida and New York all have large IT budgets, making them prime targets for opportunity development. That doesn’t mean that states like Montana or North Dakota with smaller IT budgets do not have any IT opportunities, but that those IT opportunities will likely be smaller in scope.

One thing to keep in mind when prioritizing the accounts and states in your territory, the more citizens a state or organization needs to serve the greater their need for IT to support those activities. For example, states with large populations like Texas had many more unemployment insurance claims than less populated states and therefore their spending on systems and services to support the influx of unemployment claims was larger.

Identifying IT budget holders

It would be much easier if states provided one concise budget outlining all of their upcoming IT projects with details on estimated spending, but that’s not the case.

Within each state, each individual agency controls its own budget and allocates some portion of that budget towards IT. Managing that IT budget is usually done by both the agency and the central IT authority through what’s referred to as a “charge-back” model.

In a “charge-back model, the individual agency pays the central IT authority for the IT services they consume. Typical services that a central IT agency would provide via this model include email, database management, hosting services and storage. The services that typically fall outside this model would include cybersecurity and enterprise architecture because those activities touch all agencies and are not unique (usually) to one agency or another.

Focusing on stakeholders

As you are targeting the IT budget within those states, not only do you need to include stakeholders at the individual agency, say the Department of Health, but you also need to include stakeholders at the centralized IT authority, say the Department of Technology. This dual management of IT activity can make opportunities more complex and lengthen timelines, especially if all stakeholders are not included at the outset.

Effectively identifying and targeting the IT budget can be a complex endeavor. However, if you’ve been working with your customer from the beginning as they developed their business justification, you already know who the stakeholders are at both the individual agency and the central IT authority. Keen in sync with all of those stakeholders to ensure the project is moving forward.

Stay tuned for our next blog on aligning your solutions to CIO technology priorities.

If you want to learn more about how to target the SLED market, watch my recent SLED 101 webinar.

We’re here to help you succeed in the SLED market. Check out our SLED Support Center for resources to help grow your business.

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