Federal VARs Bracing For 'Fiscal Cliff' With Little Changed On Capitol Hill5:04 PM EST Wed. Nov. 07, 2012
Top U.S. government VARs and integrators are less concerned about President Obama's re-election and its effect on federal IT priorities than they are anxious for the federal government to avoid sequestration, which in recent months has become a major source of anxiety in the channel.
Generally speaking, sequestration, more commonly called the "fiscal cliff," refers to the 2011 Budget Control Act, which will take effect on Jan. 2, 2013, unless a deal is reached to undo it before then. In a nutshell, the legislation calls for $1.2 trillion in federal cuts over a 10-year period, including some $500 billion in defense spending.
Some observers see sequestration, along with other upcoming fiscal changes such as the expiration of Bush-era tax cuts on Dec. 31, as contributing to a so-called "fiscal cliff" that will disrupt the economy over the next few years. It remains a source of contention in a sharply divided Congress, and it is also hated by officials concerned about the indiscriminate nature of the cuts and how much they take away from certain defense and domestic programs. Top defense officials have described the effect of the potential cuts, for example, as a "hollowing out" of the military, and most observers -- including from defense, healthcare and other industries -- fear catastrophic job losses as a result of those cuts.
[Related: Obama Wins, VARs Fear Job Cuts]
President Obama said during the third presidential debate in October than sequestration wouldn't happen, but the Obama Administration has also been criticized for not putting forth proposals to stop it.
According to federal-focused partners interviewed by CRN Wednesday at the Symantec Government Symposium in Washington, D.C., fiscal cliffs are far more concerning than specific Obama Administration IT priorities.
"Sequestration has been hanging over our heads for months," said Carmine Taglialatela, vice president of business development for TecPort Solutions, a Delaplane, Va.-based solution provider and also a federal IT channel consultant. "With the Congress and the Senate in the same state now as they were a few days ago, what's going to happen? We're at loggerheads, and we're not getting decisions on pretty much anything yet. I honestly don't believe sequestration will take place. It would be detrimental to the United States, so I'm hoping saner minds will prevail."
"Sequestration is not a good thing," said Barbie Bigelow, senior vice president and chief information officer at TASC, a Chantilly, Va.-based solution provider. "It's arbitrary and it doesn't allow the government to really focus on the mission and priorities for businesses. That is the most important thing: for us to get around that, or through that, to a path where we are looking at the right things and leveraging technology to enable that."
"I think the scary thing is that many of these elected officials have not been in business and don't have business heads to understand the impact sequestration would have," said the top executive at a well-known federal integrator, who asked to remain anonymous. "If you don't have some assurance where cuts will be made and what the effects on tax credits will be, you as a businessperson won't invest over a long period and you won't hire. This is not good."
NEXT: Expectations Of Change On The Federal IT Horizon
Gigi Schumm, vice president and general manager, public sector, Symantec, agreed that the sequestration issue was a big question mark for everyone involved in federal IT.
"President Obama has come out and said he doesn't want sequestration to happen," Schumm said. "Sequestration is just a huge distraction and stops [businesses] from performing their real mission."
Van Ristau, CTO of DLT Solutions, a Herndon, Va.-based solution provider, said there's too much at stake for the government not to ably head off sequestration.
"How they're going to come up with the pluses and minuses of what they need to hit, I don't know. We're going to have to have some tax revenues from somewhere," Ristau said. "But they'll figure out a way. I just don't believe we'll get to that point. There's too much to lose and not enough to gain. Congress won't let it get that far before accommodations are made."
Regardless of political leanings, Symantec and its partners don't see drastic change on the federal IT horizon as Obama begins a second term.
"I don't think the election results will significantly affect federal IT business but it's too early to know," said Steve Tiches, national sales director for Intuitive Technology Group, a Bloomington, Minn.-based solution provider. "This administration is obviously more comfortable with a bigger government, so a lot of agencies are probably pretty hopeful that there'll be additional room to spend."
"I don't think we will see major changes," said Symantec's Schumm. "Both Obama and Mitt Romney had said that cybersecurity was a priority, and we've had the opportunity to see that it has been a priority for President Obama, so I expect that to continue. Obama has also shown under his administration that's he's interested in private/public partnership, so I think that's a good thing."
Eric Wilson, director of sales for Emergent, a Vienna, Va.-based solution provider, said customers are holding on to budget dollars a little longer than usual given the financial uncertainty but that would be a likely outcome regardless of an administration change.
"I think to a large degree we'll have more of the same and start to see more budgets cut year-over-year," Wilson said. "What that'll do for customers is make them more creative and explore different ways to acquire technology and utilize things like infrastructure-as-a-service. The budget perspective is making people more conservative and go after it with a 'must-have' versus a 'nice-to-have' mindset."
Mike Maxwell, national director, U.S. State and Local Government and Education Sales, Symantec, said that at the state level, four more years of an Obama Administration means SLED-based technology buyers will hesitate less in investments such as health information exchanges (HIE) because Obama's legislative priorities are likely preserved.
"There was still some caution with the states around the health initiatives in things like HITECH, where they were waiting to see if the administration would be around. They were moving slowly waiting to see how things were going to play out," Maxwell said. "For our customers that's probably the biggest impact of the election. Folks on the fence now are looking to proceed."
"I don't think the administration will make that big a difference to the IT market," said Toby Zellers, vice president, strategy and solutions for TVAR Solutions, a McLean, Va.-based solution provider. "Most of the political conversation and political emphasis is on general budgetary issues. But in terms of technology, we know what we're getting and what the priorities are."
PUBLISHED NOV. 7, 2012