This all changed on July 10, 2008, when Apple launched the App Store as a way for third parties to bring new applications to your iPhone. Users no longer had to settle for the capabilities their phone came with out of the box, but were able to add new functions quickly and easily. Apple’s endeavor catalyzed a wave of market activity and established a new source of annual revenue that reached $64 billion in 2020.
This business enterprise is a fitting analogy to illustrate what is taking place in the government technology market today. The government-industrial complex of the past has given way to an open market where agencies can pick the best solution for each problem … even if they are not all from the same vendor. This is the gov tech “App Store moment.”
THE INGREDIENTS FOR A MOVEMENT
The gov tech App Store moment is being fueled by a collision of disparate forces that were already accelerating independently, which together have created the perfect storm for market innovation and progress. These include:
Democratized cloud infrastructure: The rise of cloud as infrastructure and new as-a-service delivery models have enabled every city, county and state government agency across the country to access world-class infrastructure at a price point based on their needs. In addition, this same technology has made it possible for eager entrepreneurs to securely provide new capabilities in government-optimized and pre-certified services, avoiding the costly path of building it themselves. Some of these cloud providers have also leaned in on the App Store dynamic by launching their own dedicated government marketplaces and incubators. Notable examples include those from AWS, Azure, Oracle Cloud, Salesforce, Google Cloud and more.
Loosening procurement rules and regulations: Many legacy rules and regulations have begun to evolve — a process accelerated by COVID-19 — enabling technology to be applied in new use cases that were not possible before. Software subscriptions and new startup-friendly procurement models have made even the most complex layers of government accessible to new innovations (and gave us Lawyer Cat as a byproduct!).
New wave of government leaders and thinking: New government leaders in both business and policy have made technology a priority for their administrations and have embraced new external thinking regarding the ways tech can be used to solve problems. Government employees, as consumers in our everything-as-a-service culture, have also continued to reimagine and innovate their existing operations into more effective government delivery models. We recognize that technologies like broadband and connectivity have also become important policy priorities for public officials across the country — and there’s no sign of this slowing down.
Changing citizen and stakeholder expectations: Citizen and stakeholder expectations for the public sector are conditioned by their interactions with private-sector companies. As consumers interact with frictionless and anticipatory digital experiences, they increasingly expect the same sophistication in their engagements with government. Government Technology’s parent company, e.Republic, has benchmarked the evolution of government experience for decades through programs such as the Government Experience Awards and has seen amazing progress and adoption of new technologies to provide human-centered delivery of services.
Entrepreneurs looking to tackle complex challenges: Gov tech was once a market that entrepreneurs were told to avoid attempting to build a business within. Today, the market has given rise to countless new startups and ideas looking to tackle the most complex public-sector challenges. From new platforms modernizing the ways government agencies communicate to a company that detects leaks from space, gov tech has no shortage of new market innovations.
Available capital for companies at all stages of growth: As a market, gov tech has attracted many new investors that are now covering all stages of company growth. According to Crunchbase, U.S. gov tech companies raised more than $1 billion in 2021 as of early December — one-quarter of which was dedicated to companies in the pre-seed stage of funding. The strong performance of the gov tech market during the pandemic has also encouraged many investors to focus on dedicated gov tech funds, following in the success of the market’s first dedicated fund founded in 2014.
Existing company and market maturity: Gov tech is not a new industry, but it is an industry going through rapid transformations accelerated by the events of the last two years. As the market has matured, there have been increased consolidations and movements from existing firms. We’ve been cataloging this momentum through our GovTech 100 for the last six years (see who’s on the 2022 GT100); our market partners like Jeff Cook from Shea & Co. have also done a great job analyzing this market activity on a regular basis.
Increased available funding: This year at the Center for Digital Government, also part of e.Republic, we anticipated state and local agencies would spend approximately $118.4 billion on information technology and services. Those were conservative estimates based on pandemic uncertainties, but the end of 2021 saw governments exceed those numbers — and will continue that forward momentum in 2022. The rise of new direct federal aid for state and local agencies, including the American Rescue Plan Act and the Infrastructure Investment and Jobs Act, have provided once-in-a-generation opportunities for state and local leaders to upgrade their infrastructure and reimagine the way they deliver services with technology.
LEVERAGING THIS MOMENT
While state and local government agencies are now able to procure “best of breed” solutions to tackle their most complex problems, there is still more work to be done to take advantage of this unique “App Store moment.” There are more than 19,000 cities, 3,000 counties, 51,000 special districts and nearly 7,000 departments across the 50 state governments all in need of new technology and partners to help them execute on their visions.
As the gov tech market has matured, service delivery has gradually moved closer to constituents. Most recently, we’ve seen digital transformation initiatives enable infrastructure to be abstracted by modernized applications — but now we must ask, what comes next? The answer is the experience layer of government.
To anticipate the future of the gov tech market, one only needs to look to the evolution of Apple’s App Store — an API marketplace of capabilities not bound by siloed applications or standalone delivery models. It’s one where services and applications are connected and interoperable, even if they are made by different companies.
Here’s how this could work: Today, when a citizen or visitor wants to interact with government services, they must have the right application and credentials to make that experience useful. In the future, what if you were able to obtain information using your voice or a text message without having any application pre-installed? What if your phone could query any government law or service based on the context you provide through your decentralized identity, location, time of day and other contextual inputs? The application and services are abstracted from the user — similar to how the infrastructure layer acts today, providing the right capability at the right time.
BUILDING THE FUTURE
Many companies in the gov tech market talk about platforms, but it’s important to understand that a true platform in gov tech isn’t a proprietary set of locked-in capabilities — it is an open ecosystem that enables data, services and transactions to flow seamlessly, anticipating the needs of users along the way. The gov tech platforms of the future are open ecosystems that embrace interoperability, data standards, service marketplaces, portable identities and accessibility-as-a-default. Companies must leverage all the drivers catalyzing this “App Store moment” to build the right foundation necessary to support the not-too-distant future of gov tech. Today’s market activity is just the tip of the iceberg.
