Shared Services Take Center Stage in Federal Policy and Channel Sales9:23 AM EST Mon. Oct. 01, 2012
Skip Liesegang is vice president of the government channels division of immixGroup, which helps technology companies sell to the federal government. He can be reached at Skip_Liesegang@immixgroup.com. Here, Liesegang discusses how the upcoming presidential elections could impact your government business. ImmixGroup was #67 on CRN's 2012 Fast Growth list.—Jennifer Bosavage, editor
As the nation looks to the next presidential election, the government’s current fiscal year is drawing to a close. Uncertainty over the federal budget is higher than normal. Congress may reach a compromise on the budget during the “lame-duck” session between the election and the next congressional session.
It’s not all doom and gloom for companies selling into the federal government — government IT opportunities are still plentiful. In order to succeed in this environment, vendors need to understand where the opportunities lie, the policies that effect procurement decisions, and how to evolve sales strategy to support the new procurement models.
To find those government IT opportunities, companies have to take a close look at each agency’s 2013 and 2012 budget documents to see where the agency wants to go in the future. Keep in mind that until at least March, agencies will be constrained to spend in accordance with 2012 appropriations. The best sales opportunities are in programs that may be already in development; those have the best chances of continuing. It’s also important to find those programs that may already have passed muster with TechStat reviews, which would do away with programs that are exceptionally late or over-budget.
It’s undeniable that the past 18 months have created huge changes in federal IT acquisition and procurement policy. Many of the IT policy changes were proposed by former federal CIO Vivek Kundra and more keenly focused on by his successor, Steven VanRoekel. The policies look to cut operating and maintenance costs, improve the speed of application development, and move to shared services as a procurement model.
Those changes are almost certainly inevitable, even in the event of a change of hands in the Office of the President. Draft legislation is circulating on the Hill that would hardcode them into law. Reviewing the new Digital Strategy, and the Federal Data Center Consolidation and Cloud-first strategies will give companies selling to government the best idea of how to position technology for the most receptive ear during the IT acquisition planning process.
On the procurement front, changes have been more scattershot. Between Congress and the Office of Federal Procurement Policy, contractors will see looser rein over pre-solicitation communications, tighter control over supply chain management and prevention of counterfeit goods, greater emphasis on small/disadvantaged business contracting, and more demand for commodity IT purchases and strategic sourcing agreements.
Value-added resellers, solution providers, service providers, and federal contractors all have to ask themselves the fundamental but critical question, “How do I transform my business model in light of these changes?”
While recognizing that government IT opportunities are evolving toward technology “as a service,” some companies are struggling because this is a very different business model. It’s a challenge to build an organization that grows customers based on recurring revenue when the customer has only annual spending authority. Many manufacturers have not yet transformed and positioned their product set to address this challenge by offering the government acceptable options.
Such changing dynamics have caused some companies to adopt a “wait-and-see” approach. Professional services firms know they will need to scale back, but how fast? Product-centric companies know they will have fewer, but more centralized, customers. Some are leading by helping agencies set future-leaning architectures, providing the infrastructure -- servers, networking, storage management, and application middleware -- that enables virtualization and increases bandwidth, which in turn will drive the new cloud-based IT policy goals.
For the rest, it’s important to take a fresh look at partnerships. Cloud-based services will require the transformation of the classic reseller model. Beyond just bringing together various product sets, companies have to take a closer look at the delivery mechanisms by which these solutions are being sold to the government. Take software: Government IT opportunities are moving from perpetual licenses to subscription or usage-based arrangements. Manufacturers and publishers do well to work with the channel to create new options and make them easy to buy, with clear terms, under existing contract vehicles.
Remember, the government is being very careful about spending for capital expenditures. Buyers are looking at up to 10 percent reductions in their budgets. Companies selling to the government will have to create more granular pricing structures with more flexible options to accommodate ever-increasing requirements in a time of decreasing spending authority.
VARs and solutions providers have to show how they can help government agencies meet the big mandates of virtualization, consolidation, cloud services, security, mobility, etc. – all in a cost-efficient manner. What’s more, they have to finely tune the message to show how they can meet those mandates in light of looming sequestration.
Finally, it’s important to note that contractors are still required to work with a variety of small businesses to meet not only socioeconomic goals, but to bring niche solutions to government in a competitive manner. There is an opportunity for VARs to step into that role, to a degree that might otherwise traditionally have gone to bigger contractors.