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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.
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