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Public sector technology procurement is poised for dramatic change over the next decade, with cloud computing, consolidation and firm-fixed price contract vehicles among the most important trends for integrators to understand.
That was the word this week from Gartner, which in various analyst presentations at Everything Channel's IT ChannelVision Government event offered public sector integrators some predictions on what's to come. With government still the second largest vertical market (behind financial services) and accounting for some $125 billion in IT spending, opportunities abound for the smallest VARs and the largest global integrators alike.
Given all the changes in technology, the ability for the federal government to "change on a dime" is still very difficult, argued Rishi Sood, Gartner vice president and head of public sector programs, in a Sunday presentation to attendees.
"Contract scrutiny is as high as we've ever seen. The firm- fixed price model is the biggest change," he said. "And [these changes] have less to do with glitzy trends like Web 2.0 and more to do with getting projects implemented."
Firm-fixed price contracts occur when the public sector entity pays the contractor a fixed amount that won't vary, and the burden of accountability is shifted more to the contractor to deliver on what's promised, thus shifting more accountability to the integrator.
The movement to firm-fixed price (FFP) contracts is a new reality, Sood emphasized.
Not only that, but FFP contracts are a reality that will be seen in as many as 30 percent of federal contracts within the next few years.
Sood added that the American Recovery and Reinvestment Act (ARRA) dollars -- earlier this year such a key focus for the technology community -- would still provide opportunities in directing IT spending and aligned IT spending and through ripple effect on projects that weren't directly funded by ARRA dollars.
But he admitted that "expectations were larger," and the net effect of stimulus, he said, would be short term IT acceleration, not broad opportunity.
"A pot of gold? Not in your wildest dreams," Sood said, explaining how only about $22 billion to $32 billion of the $787.2 billion stimulus had an effect on IT spending. About 60 percent of that, Sood added, goes to state and local government projects.
While Web 2.0 and social networking are important trends to observe, Sood said, they're little more than "nice polish on the market." Similarly, cloud computing is more a "when" than a "what." In other words, cloud is still more of a conceptual model for government infrastructure and actionable deployment opportunities for integrators are still emerging.
Sood said that cost optimization, not transformation, would drive public sector IT business in the short term. Business process outsourcing would continue to be a major trend, he added. Thanks to state- and local government-reared tech leaders like federal CIO Vivek Kundra expect interest in taking state-style IT policies and applying them at the federal level.
In addition, there would be continued opportunity for integrators in government health care, climate change and energy, social services, civil security, and, especially, non-Department of Defense supply chain safety in areas like Health and Human Services and agriculture. That last area, Sood said, has more "competitive whitespace" for integrators than almost any other in the federal government right now.
Sood said that IT spending at the federal level would continue to increase, with Gartner projecting $72.1 billion in 2009, $75.1 billion in 2010, $79.6 billion in 2011, and $81.1 billion in 2012. It remains to be seen, Sood said, whether the next half decade will see a contraction in that spending. Among individual departments, the most substantial growth will be in Homeland Security, Veterans' Administration, Department of State and Health and Human Services.
Integrators should focus on understanding the FFP contract model and opportunities around cloud computing in the short-term, Sood urged. Civil growth, cybersecurity, BPO and extended IT opportunities around services are all trends to keep an eye on.
Next: How Integrators Should Monetize And Sell Their Strengths
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