Otto Doll, CIO of South Dakota and someone who has long been involved in a national association that represents top state IT managers, also sees new interest in outsourcing among his peers. 'Right now, there is a big drive toward consolidating services -- and one of the options when one looks at consolidating is whether you are going to do it in-house or whether you are going to outsource it,' he said.

'Consolidation is on a lot of people's minds,' said Doll, who is also on the executive board of the National Association of State Chief Information Officers in Lexington, Ky.

Government IT services have long been stymied by 'stovepipe' systems built to support individual state agencies. Doll said he sees a range of consolidation plans that run from basic efforts to combine data centers and networks to larger schemes by state governments interested in consolidating all IT services under one organization. The latter is what Virginia officials are eyeing.

Doll said his state consolidated its IT services in the mid-1990s but uses outsourcing only in a limited way, such as hiring contractors to help with application development. He said South Dakota has compared the cost of providing IT services with outsourcing, 'and it doesn't prove to be a viable economic decision for us.'