10 Hot Topics For The Federal IT Buying Season8:05 PM EST Fri. Sep. 04, 2009
September is one of the busiest times of the year for anyone -- VAR, vendor, agency head, procurement officer and otherwise -- with a stake in how the federal government buys its technology. The fiscal year ends on Sept. 30, meaning agencies that still have budget dollars to spend are in a rush to empty their wallets, and a new year and procurement cycle kicks off Oct. 1.
A new presidential administration, the push toward cloud-based solutions, the difficulties of cybersecurity and the opportunities presented by stimulus are among the dynamics shaping the federal spending climate this year and next. Channelweb.com caught up with a range of VARs, integrators, distributors and vendor executives to understand the most pressing issues at hand. Have a look.
According to Input and several other market researchers -- whose projections line up with a lot of the reporting happening on the federal IT dashboard (it.usaspending.gov) -- the federal government will spend more than $75 billion on IT solutions in fiscal 2010.
"We've expanded our teams and done training for the entire Tech Data sales force to figure out what we can do to help government resellers get all that they can," said Barb Miller, vice president of government, technical and integration services at Tech Data.
"There's lots and lots to do -- we're going to post the largest government numbers in Tech Data's history this year. I think [VARs] realize that the government is spending money, at least compared to the commercial marketplace. And they're trying to buy smart."
Miller named UPS and virtualization, security, document imaging, storage and mobile solutions (including notebooks, though not netbooks) among the most sought-after federal government technologies.
"We started reviewing the Fiscal 2011 OMB budget guidance when it came out in July, and the emphasis they place on IT is unprecedented," said Van Ristau, chief technology officer at DLT Solutions, a Herndon, Va.-based solution provider. "They're very interested in cloud computing specifically. It's specifically called out in the guidance as something that should be used by government for efficiency, cost savings and effectiveness. It's becoming of very high utility."
Both federal CIO Vivek Kundra and CTO Aneesh Chopra are high on the idea of an open, transparent government that leverages technology to improve the way the government does business. Such explicit discussion of cloud-based solutions in budget guidance means their impact is being felt, Ristau said, and the notion that government is finally embracing cloud and other services-oriented solutions and architectures is no longer just a quaint idea.
"It's not there yet, but it's certainly a concept that's becoming more real in government," said Jack Cayouette, president of Fedstore, a Rockville, Md.-based solution provider. "We are seeing an overall trend toward the adoption of the cloud model -- a lot of piloting of cloud solutions, especially -- and a confidence level in the federal government that sees cloud solutions as making business sense."
The American Recovery and Reinvestment Act (ARRA) is said to be a boon to information technology -- and it is -- but that hasn't translated to the immediate moneymaking opportunities many solution providers once hoped for. With notable exceptions (i.e. health care), VAR opportunities directly related to ARRA at the federal level are relatively quiet.
"It hasn't affected the dynamics of our business," said Tim Conway, senior vice president and managing director of ACS Federal Solutions, the federal government division of Dallas-based integrator Affiliated Computer Services. "There's certainly been a lot of money allocated to revolutionize how we provide and support health care, but I think overall, many of the dollars targeted in stimulus simply haven't proliferated yet. To the government's credit, they seem to have sought input from the industry about ideas and a vision for the future. The market in federal is definitely growing fast."
Fedstore's Cayouette said he doesn't see a lot of direct impact on Fedstore's principal contract vehicles, which include multiple General Services Administration (GSA) and government-wide acquisition contracts (GWAC), such as the NASA SEWP (solutions for enterprise-wide procurement).
"We're aware of it of course, so if something is procured through funds made available, we'll be there," he added. "But it's hard to say because we're not seeing a lot beyond what's happening in the medical vertical, with health records. SEWP does have a whole section on Recovery Act guidance, though -- I think it's seen as something coming down the pike. They're saying, we want you guys to help us craft a solution that will allow us to do 'x' or 'y' under the recovery funding."
Joel Lipkin, general manager of TKC Integration Services, a Herndon, Va.-based solution provider, said TKC is actively looking to add vendors that tackle 21st century federal government problems, such as cybersecurity. Lipkin named Sendio, whose products he said allow him to build federal solutions that aren't based in a rip-out-the-old, install-the-new mentality but complement existing architectures.
"They need solutions that enhance and complement, not that replace," Lipkin said of his federal contracts. "They also need solutions that offer an explainable and demonstrable technical advantage over the current baseline. We don't want a situation where we're saying, 'Here's 15 flavors of antivirus, which would you like?' It has to be, 'Which antivirus is going to work best for your situation?' and provide it. You need a good toolkit that you can reach into to put together a solution that's going to work for that particular situation. Some vendors offer that. Others don't."
A diversified solution set has been crucial to ACS Federal, said Conway, who's seeing the government's priorities line up with ACS Federal's strengths, just as the company emerges. (After a five-year absence, ACS returned to the federal market in November 2008 after a noncompete agreement it signed with Lockheed Martin -- which had acquired ACS' previous federal unit in 2003 -- expired.)
"The business we divested back then was primarily a staff augmentation business," Conway said. "Now, it's great timing with all the emphasis on efficiency. That's what we do. We have what I call four aces: mail room and administration services, customer care, finance and accounting, and intelligent transaction processing. Ace No. 5 is health care and support for making the business of health care operational. We're now in a position where we can take the successes we've had in other areas and apply them to the federal government."
With a shift in presidential administrations also comes a shift in priorities, and several solution providers are eyeing federal agencies with the thought that new IT priorities -- and new oversight on efficiency and cost effectiveness of technology -- are going to create openings for smaller businesses and specialty players that haven't always been there in the past.
"They're really taking a look at the value they're getting from what they're buying, and in the next year plus, you're going to start seeing companies of our size getting more and more visibility inside of federal agencies that we haven't in the past," said Matt Garst, vice president of worldwide sales and marketing at Enterprise Information Management (EIM), a Dayton, Ohio-based solution provider and IBM partner.
Among several contracts, EIM has had great success particularly with the U.S. Army, for which it designed and implemented a business process automation solution that saves the Army $1 billion a year in personnel fitness and evaluation reports. Garst credits EIM's ability to come to agencies as a fresh face with fresh outlooks on business process management -- not the same ol', same ol' "What do you need this year" style approach seen in many stagnant, legacy integrator contracts.
Is the era of Instant Return on Investment (IROI) starting in government, as it has in commercial?
"A lot of the larger companies that have been on contract forever may suddenly find themselves going away," Garst suggested. "The government is tired of paying for something now and not seeing results for years and years, so they will start looking at smaller companies that truly understand particular technology areas instead of some of the big integrators they've always gone with. We've been starting to see some of that in the last 18 months, no doubt."
Cyberattacks are growing in volume and sophistication, and thanks in part to a number of high-profile hacks in recent years -- from Hannaford to Heartland Payment Systems -- the issue of cybersecurity is in the news on a daily basis. With the government's efforts to name a cybersecurity czar stalled (and its candidates getting hired elsewhere), VARs and integrators are trying to keep the pressure on the federal government to understand just how serious the threat is to both commercial enterprise and to the government itself.
"Government is emerging as ground zero for the focus of the attack on the enterprise," said TKC's Lipkin. "It's large and complex and has issues with different levels of classification, and the need to protect information at different levels is something you balance into every equation. The solution is not to get everything off the network, though. It's a really complex problem and no one has a single map for 'Here's how you do things in each case.' "
The topic was popular at a number of recent conferences, including Virtual FOSE in August, where executives from government agencies and vendors alike led sessions focused squarely on cybersecurity essentials. Cybersecurity measures have to be holistic, they insisted. The days of piecemeal solutions to protect various levels of government classification and sensitive data are long over -- and not only that, the solutions are dangerously minimal.
"We are being exploited at unprecedented scale by a growing array of state and nonstate actors," said Robert Carey, chief information officer for the U.S. Navy, in his Virtual FOSE keynote. "We need to transition from the old, insufficient security posture ... to a 'new normal.' "
The depth of a solution provider's penetration into the federal government often depends on its ability to land on procurement vehicles and provide a diverse array of services in areas other VARs and integrators can't.
Mike McMahan, president of Toano, Va.-based SDV Solutions, credits the launch of SDV's global support division for helping to spur its growth. The division enables SDV, a service-disabled-veteran-owned VAR doing 100 percent of its business through the federal government, to serve federal facilities that are OCONUS (outside the continental United States), and therefore, as McMahan described in a recent Channelweb.com interview, "open a lot of doors for us in federal."
"We started out as a pure box pusher and, with margins shrinking thanks to more competition and credit markets changing, we looked at our business model last year and successfully moved into the services arena to have it be complementary," McMahan said.
Per CRN's recent 2009 Fast Growth 100 list, SDV Solutions placed fifth overall, with a commanding 346 percent year-over-year growth rate. In fact, a number of companies with heavy federal government interests -- and expanded services capabilities -- are among the top 10, including Fedstore (No. 2, with a 2,681 percent growth rate), Carahsoft Technology (No. 6, at 280 percent) and Govplace (No. 7, at 224 percent).
Solutions embracing virtualization, data center and networking capabilities -- including mobility -- are still going to the front of the line, most solution providers said. Those with practiced hands in each area should focus not only on continuing the technologies' penetration into the federal government, but also learn to spot the next important developments in each just before the government begins to embrace them.
"The story hasn't changed much beyond the continued push to virtualization," said Fedstore's Cayouette. "But from the federal side, we are seeing a lot more interest in videoconferencing, especially in places like the Department of Defense. They get it and understand it, but not much of the rest of the federal government is there yet. That's something that's definitely developing."
It's no secret that some of the best public sector opportunities -- stimulus-related and otherwise -- are in health care, where there are grant programs, including the HITECH (Health Information Technology for Economic and Clinical Health) spending in the stimulus and a range of appropriations for various departments and agencies (Department of Health and Human Services and the Social Security Administration perhaps most visibly). VARs and integrators that can figure out how to capitalize on health care initiatives at the federal level -- not to mention the regional opportunities in state and local health care entities -- will find themselves assured of business.
"As we move to 2010, we're really trying to expand our aperture," said ACS Federal's Conway. "A lot of people are starting to focus on Health Information Exchanges [HIE] and ACS has been a pioneer there. We first bit on a deal in Alabama, for example, and we're now providing HIE for the state. A lot of people are out espousing a value proposition for HIE and it's something we already have and something that's given us a significant head start. You can't jump from nowhere to an HIE overnight -- it's a journey -- but you can evolve and transform health care into something that delivers immediate benefits and translates into significant savings."
"Health IT is already funded [by stimulus]," added DLT's Ristau. "And it's moving at its own pace, with milestones and a schedule. We're going to have strong health IT opportunities going for at least the next five years, and you'll see a number of people lining up to participate. Where they get caught up is that some tend to get focused on their specific technology and don't see some of the overlap."
It's in that overlap -- the multiplatform, multivendor solution -- that the solution provider succeeds, he said.
Further reading: 10 Hot Health Care Plays For VARs.
As a number of VARs continue to tell Channelweb.com, the drumbeat for open source's role in government is getting louder every year. Before, that might have sounded like wishful thinking, but as the new, tech-savvy administration transitions, vendors and solution providers who deal open source in the public sector arena are suddenly feeling some traction.
Rest assured that's not lost on the government teams at vendors such as Red Hat -- which earlier this week kicked off a new channel program with open-source ISVs, plus distributors such as Tech Data and Synnex at its Red Hat Summit & JBoss World Conference -- or the organizers of the Government Open Source Conference -- this year moved to Washington, D.C., and in the fall, with dates to be announced any day now -- which was on the minds of a number of Red Hat Summit attendees, Channelweb.com has been advised.