SLED IT Market Forecast, 2025-28 (with data set)

2024 marked a peak in the recovery cycle since the 2020 pandemic, with higher-than-expected IT growth during the last year of ARPA stimulus allocations. Earlier predictions of economic slowing in 2024 were unfounded, with many healthy budgets, available funds and continued strong technology demand prior to reduced broad ARPA stimulus in 2025 and potential post-election changes. A recession is still possible in 2025, with rising odds but no consensus yet. Competitive IT opportunities saw a slight decrease for 2024, with modest purchasing impacts expected in 2025 due to typical lags. Looking forward, we expect strong performance in high-impact IT services such as AI, cybersecurity, and cloud, which can help support the forecast of spending through 2028 on par with historical levels.

Key market trends that will affect SLED IT spending:

*Ending of broad ARPA stimulus allocations means many states and governments are facing tighter budgets, and some are implementing DOGE-like efficiency initiatives.

*Increased risk of recession with the new administration’s tariff strategy along with greater uncertainty around federal grant funding that can affect the purchasing outlook.

*AI finally takes off in 2024 as a high-potential theme with implications for strategy, efficiency and compliance. It has by far the strongest growth among IT services through 2028.

*Cloud computing continues to grow and remains a significant area of focus for SLED IT.

*Cybersecurity is becoming increasingly important and urgent in today's less secure global environment.

*IT projects are increasingly aiming to connect between different functions of government and find solutions that involve multiple contexts. 

* Based on the combined input of our SLED analysts, IT seems to have somewhat higher confidence and priority versus many of the major industries or products/services as governments seek greater efficiencies while maintaining acceptable service levels.

*Some potential growth drivers include more support for law enforcement and border security, possible new investments in certain functions that could become split off from federal jurisdiction such as parts of FEMA and the Department of Education, as well as potential growth in some niche services to help governments navigate the current environment.

This report will help SLED IT vendors, consultants and suppliers to:

* Assess the SLED information technology (IT) market size, forecasts, and segmentation for purposes of business development (BD) strategic planning.
* Assess the proportion of IT spending by state, level of government and vertical.
* Assess the proportion of IT spending among the major market segments (i.e., Communications & Network Services, IT Hardware & Equipment, IT Services, and Software Products).

This forecast report includes the following:

* Incorporating revisions in macro data from Bureau of Economic Analysis (BEA)
* Updating the data set for 2024 as an actual year
* Estimating/forecasting 2025-28 years to support a forecast series of 2023-28 for trending and analysis in the report 
* Including in the forecast series four major IT segments and 23 specific IT categories

NOTE: This report is presented as a chart book of data providing the highest-level overview of the SLED market and comes with a detailed Excel file with geographic and segment breakouts.

Methodology

A discussion of the methodology is available in the report. The analysis and forecasting is based primarily on the following two primary sources:

* Deltek’s GovWin IQ database of contracting data for actual years of 2018-24   
* The Bureau of Economic Analysis’ annual estimates of major categories of SLED procurement spend

Data Set

This report download also includes the companion data set in XLS format (download zipped file to unlock both files).

The data set includes estimated spending amounts (US$ millions) and a pivot table that allows the user to view estimates with one or more of the following classifications:

Years 2020 through 2028 (9)

All 50 states + DC (51)
Type of Government, using Deltek’s expanded list (8)
Deltek Verticals (12)
Deltek Major IT Segments (4)
BEA Commodity Categories of IT (23)