ICYMI: Beyond the Beltway Market Briefing Rundown

The Center for Digital Government’s 2025 Beyond the Beltway Market Briefing event took place in Mclean, VA last week where state and local government leaders shared insights into top technology priorities for 2025.

Some of the key topics of discussion were the 2025 state and local market outlook, the potential impact of the new administration on government technology, emerging technologies such as AI, the foundational role of data, the evolving cybersecurity landscape and modernization and the customer experience.
 

2025 State and Local Market Outlook

In 2025, state and local budgets are beginning to normalize, with general fund spending anticipated to decrease slightly, but overall spending seeing a consistent increase nationwide. We are finally seeing pandemic-era federal funding come to a head, and states and localities are now focusing on long-term sustainability and maintenance of IT projects.

There has been an overall rise in technology-related legislation over the last few years, and 2024 saw a 163% increase in technology-related bills since 2023. Governors in both red and blue states have voiced commitments to technology and innovation, with a strong focus on digital modernization, cybersecurity and AI-driven innovation to improve efficiency.

State and local governments are still experiencing staffing and talent shortages, especially throughout the verticals of health, public safety and education. Local governments in particular felt more severe recovery effects from the Covid-19 pandemic, and as they are on track to stabilize their economies, they will be seeking technology solutions that can further support economic stability and vitality, such as automation-based solutions. In 2025, IT companies that specialize in managed services will see opportunities to help end users better manage their workloads.
 

2025 Federal Policy: Expectations for state and local government

The 2025 administration has strongly emphasized policies that focus on efficiency and innovation. Potential funding cuts and shifting priorities could present increased budgetary pressure for states and localities, which may lead to programmatic changes in areas such as public safety, health and education. Federally funded programs such as the IIJA and the IRA could also see some volatility around unobligated funding. These funding shifts could change the way state and local government agencies think about IT service delivery and end users will be more inclined to consolidate services when feasible.

IT companies offering interoperable solutions that integrate easily with existing infrastructure will be well-positioned in 2025. Increased attention towards efficiency, streamlined service delivery and cost reduction will spur demand for AI-powered chatbots, process automation tools and predictive analytics.

With a shift in federal priorities, we will likely see more responsibility and control handed over to the states, spurring additional legislative action at the state level in 2025. For technology purchases, this would mean more discretion and flexibility, but there could still be potential budget constraints that come into play.

The Trump administration is also looking to make changes to various federal policies around immigration, healthcare, education and the potential addition of new tariffs. States and localities could face downstream effects that impact labor markets, pressure to fill federal funding gaps and reworking of programmatic structures and requirements. As a result, government innovation and efficiency will serve as a renewed focus and present downstream opportunities for technology companies that can offer adaptable and agile solutions with low cost-ownership models.

Following the federal government’s creation of DOGE, states like Texas, North Dakota and Iowa are establishing their own government efficiency task forces. Iowa, for instance, is focusing efforts on lowering state and local spending and lowering property taxes in the 2025 legislative session.

The 2025 state and local government technology market will be looking to maximize ROI, boost efficiency and drive innovation. Be ready to discuss total cost-ownership models up front, as states and localities will be looking for solutions that support potential budget constraints. We will likely see a lot more innovation and flexibility at the state and local level, with increased reliance on managed services providers and P3s to offset challenges. IT companies that specialize in cloud, AI and cybersecurity will play a key role in agencies’ quest for efficient modernization. When working with end users at the state and local level, tailor your messaging around optimization, cost and predictability.
 

Artificial Intelligence

AI’s influence on government operations is undeniable; whether it’s public safety, health or education, AI is shaping government operations across all verticals. Through a wide array of applications such as natural language processing, task automation, image recognition and smarter policymaking, AI is shifting how state and local governments interact with their constituencies and carry out day-to-day tasks.

In 2024, 41 states passed 107 bills regulating AI, but like many new areas requiring legislative oversight, there is quite a bit of AI and privacy fragmentation at the state level. States are establishing AI and privacy laws without an existing federal consensus around AI policy, leading to a lack of regulatory cohesion.

In 2025, we can expect more emphasis on the role of data as a critical counterpart to AI’s adoption. There will be a focus on establishing a sound data architecture and strategy around how to use data to make AI work. We will also likely see Agentic AI provide innumerable benefits to state and local governments with its ability to adapt quickly to changing environments and automate a variety workflows and business processes. The transition from rules-based automation to utilizing contextual data for optimization, state and local government agencies can accomplish a wider array of tasks and improve the quality of service delivery and automated interactions.

When it comes to generative AI, quite a few states are at a relatively similar maturity spot. For state and local leaders, the priority is to establish robust policies and frameworks, study potential effects through use cases and encourage open and honest discussion amongst stakeholders. Considerations around risk evaluation, procurements and contracts, workforce and equity and accessibility are also key.

IT companies should continue to monitor developing regulations and policies governing AI and its usage, with the understanding that security, privacy, accessibility and data governance will be top of mind. For IT companies in the security and/or privacy space, state and local government customers will be looking to bake in stringent security and privacy measures throughout all layers of AI’s execution. This “secure by design” approach will require the protection of all AI systems and critical infrastructure from cyber threats. Secure and resilient AI software development and implementation will require software vulnerabilities to be addressed, and AI manufacturers will need to prioritize security throughout the product’s entire lifecycle.
 

Data

Data, data, data: data is proving to be an integral piece of modern, foundational IT. The advancement and adoption of generative AI has generated concerns around data management, governance and quality. State and local leaders agree that the intersection of data and emerging technologies such as AI is critical to achieving success in innovation.

With potential administrative programmatic shifts, there will be opportunities around not just the program data itself, but on tracking where funding is going and how much is being spent, increasing access to data and ensuring availability of clean data for AI models that can assist with operational efficiencies.

IT companies that can help agencies track this data will be well positioned in 2025. State and local agencies recognize the fundamental role of data quality, management and accessibility in everyday operations. When working with end users, discuss the ease of solution integration within their existing data infrastructure. To address challenges around data management and quality, position yourself in the near-term to partner with state and local agencies to help mitigate some of their concerns and help them to become more innovative in future adoption of emerging technologies.
 

Cybersecurity and Risk Management

Unsurprisingly, cybersecurity is still top of mind for state and local leaders and will continue to drive purchasing decisions for end users. Cybersecurity threats continue to pose risk to our nation’s infrastructure and bad actors are only becoming more sophisticated as their access to emerging technology such as AI becomes easier.

With a drive towards efficiency in 2025, state and local leaders will want to shore up their cybersecurity posture as security incidents can become impediments in the implementation of efficiency-related AI projects, for example.

Cybersecurity is still benefitting from an all-hands-on-deck, whole-of-state approach with interagency collaboration and governed under a secure framework such as Zero Trust. Security tools such as multi-factor authentication, endpoint detection and vendor risk management solutions are key.

For local government leaders, enhancing cybersecurity posture and overall resilience is paramount. Bert Quarfordt, Deputy Chief Information Officer of Infrastructure for the city of Houston, TX, stated that as one of the host cities for the 2026 World Cup, he is focusing on improving Houston’s cybersecurity and related infrastructure, with emphasis on enhancing resilience and redundancy of infrastructure through multiple network paths and systems.

In 2025, state and local governments will look to AI and other emerging technologies to help reduce the cybersecurity threat and attack surface since AI can proactively monitor, predict and support threat detection. IT companies can help end users integrate the proper software and firewall protections, ensure they have reliable backup systems, provide cyber training for staff and testing for vulnerabilities. Other security-related tools and solutions that will continue to be essential are systemwide multi-factor authentication, continuous security monitoring, encryption and cloud backup processes.
 

Modernization and the Citizen Experience

Enhancing the Citizen Experience will continue to be a top priority for state and local leaders in 2025, as the modern world demands personalized and agile service delivery. When it comes to public trust in government decision making, transparency and accountability will continue to drive procurement opportunities.

States are becoming increasingly more innovative in their approach to technology adoption, and there is no doubt that modernization and digitization efforts are influencing technology acquisitions. Workforce modernization will also continue to drive investments as states and localities look to bridge gaps in staffing and talent.

As we continue into 2025, you will want to tailor messaging around how your solution can complement these efforts while addressing each state’s unique pain points and challenges. Be prepared to discuss the benefits around how your product or service can help manage government service delivery, generate actionable insights, enhance security and privacy and support efforts in innovation.

To get more TD SYNNEX Public Sector Market Insight content, please visit our Market Intelligence microsite.
 

About the Author: Yvonne Maffia is the senior analyst covering state, local and education markets. She applies insights and analysis to purchasing trends to help vendors and partners shorten their sales cycles. Prior to joining TD SYNNEX Public Sector, Yvonne spent 8 years working in state and local government, where she oversaw advisory boards across the State of Florida and served as an analyst to a local politician. Yvonne currently lives in Washington, DC.