If you’re an IT company looking to expand your footprint in government contracting, now is the time to take a closer look at the State, Local, and Education (SLED) market. With more than $1.5 trillion in annual spending and over 100,000 individual governmental agencies, SLED represents a massive and often underutilized opportunity for IT firms, especially in light of recent priorities set by the new administration.
A renewed federal focus on IT innovation, cybersecurity, and digital modernization is already cascading down to the state and local levels, generating a surge in demand for qualified contractors across a range of technology areas.
SLED – IT Contracting Trends:
- Artificial Intelligence (AI) Is a Top Priority
AI adoption is accelerating across all levels of government, and the SLED market is no exception. State and local agencies are exploring how AI and Robotic Process Automation (RPA) can enhance service delivery in sectors like transportation, education, public safety, and even procurement.
According to the National Association of State Chief Information Officers (NASCIO), AI/RPA ranks as the top priority technology for state CIOs in 2025. This means SLED agencies will be actively seeking contractors with experience in AI implementation, data modeling, machine learning, and automation tools.
If your company specializes in AI-powered solutions or has the capability to develop custom AI applications, now is the time to start marketing those capabilities to SLED buyers.
- Cybersecurity Contracts Are Surging
Cybersecurity remains the No.1 IT priority for state governments, according to the same NASCIO survey. With increased threats, tighter compliance requirements, and more sensitive data in digital systems, SLED agencies are investing heavily in protecting their infrastructure.
This presents an outstanding opportunity for small IT firms offering:
- Risk assessments
- Vulnerability scanning
- Incident response
- Managed security services
- Compliance support for frameworks like NIST and CMMC
It’s also a great time to ensure your own firm is compliant with relevant cybersecurity regulations, which can give you a competitive edge in the bidding process.
- Software Modernization Is in High Demand
Legacy systems are becoming a serious bottleneck for state and local agencies. In response, the administration has signaled its support for widespread software modernization efforts, and SLED agencies are following suit.
NASCIO ranks “legacy application modernization/renovation” as the second-highest technology priority for states in 2025. From grants and licensing platforms to case management and digital services, SLED governments need expert partners to help transform outdated systems.
If your company offers custom development, cloud migration, system integration, or modernization services, you’ll find growing demand in every corner of the SLED market.
- State IT Contracting Vehicles Make Access Easier
Many states maintain contracting vehicles and pre-approved vendor lists specifically for IT services. These vehicles are designed to streamline procurement, making it easier for qualified vendors to offer solutions without competing in every open bid.
Small IT businesses offering AI, cybersecurity, or modernization services should actively pursue inclusion in these programs as a way to gain credibility and access long-term opportunities.
The momentum around IT transformation in SLED markets is real and small business contractors are perfectly positioned to capitalize on it. Stay informed, stay compliant, and stay visible. The opportunities are out there now, it’s your time to win them.
