GovernmentVAR 100: At the Top of the Heap

Impressive are the solution providers and systems integrators that achieve double-digit growth in a market plagued by tight budgets, long procurement cycles, cumbersome regulations and challenging contract logistics. Those that achieve triple-digit growth are astounding. The 2006 GovernmentVAR 100 highlights integrators and solution providers that are not only keeping up with business expectations but exceeding them.

The average revenue for the 2006 GovernmentVAR 100 is a whopping $846 million, ranging from nearly $10 billion for integrator giant Lockheed Martin, which claimed the No. 1 seat for the second year in a row, to roughly $44 million for British Columbia-based Sierra Systems Group.

Five companies reported revenue growth of 100-plus percent, 14 reported 50-plus percent growth and eight moved up in the ranks. Only 17 companies saw their revenue decrease from 2004 to 2005.

So what are these companies doing right?

Top-three systems integrators Lockheed, Northrop Grumman (No. 2) and (No. 3) Science Applications International Corp. (SAIC) consistently demonstrated success by acting as trusted advisers to mega-agencies, offering a diverse array of IT solutions and services, and maintaining in-house expertise to navigate the ins and outs of federal contracts.

"The IT sector in federal government is still robust, but interestingly, it's starting to morph," says Clement Chen, vice president of strategic analysis and development at Lockheed. "Elements in different verticals--from health care to homeland security--are becoming part of the same fabric. IT is blending into the background of all government missions, demonstrating tangible benefits."

As federal-government verticals converge, the demand for interoperability and service-oriented architectures (SOAs) grows, driving standardization of interface protocols at the application level, Chen says. Interoperability also drives demand for wired and wireless networking software and equipment, enterprise applications, and consulting and integration services--all of which generated strong sales for leading federal integrators in 2005.

Furthermore, in a market that relies heavily on strategic partnerships, top systems integrators achieve big revenue by playing a dual role. First, they meet the needs of demanding customers with contracting and integration expertise; second, they leverage the niche technologies, supplemental services and on-the-ground support offered by smaller solution providers for more efficient contract fulfillment.

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