Feds Schools Weigh IT Needs

Continued economic uncertainty, coupled with the effects of the Sept. 11 terrorist attacks, have government agencies and schools rethinking IT projects, distributors and solution providers say.

Distributors had hoped the $1 billion government and education marketplace would provide a safe haven from the downturn affecting the commercial markets. For the most part, that's been the case, they said.

However, the federal government's buying season closes at the end of the month, and Ingram Micro is reporting "flat" revenue in that market, while Tech Data is noting a rise in federal spending.

At the state and local government level, agencies are re-evaluating how badly some projects are needed and weighing IT spending with a "careful eye," distribution executives said.

"The state [government] market here in California has been hot and cold, at least with the energy issue," said Tim Burke, CEO of Quest, a solution provider in Sacramento, Calif. "Over the past three years, I've seen a tremendous increase [in government IT spending], but I do feel that we are now on the downward slope of that spending curve."

At the federal level, the fiscal 2002 budget emphasized e-procurement, streamlining processes and outsourcing services, according to Gartner. To achieve the $14 billion in outsourcing savings noted in the budget, the research firm estimated the government would have to bid out at least $140 billion in services through 2005, said French Caldwell, an analyst at Gartner.

And the government's streamlining goals will require e-government and interoperability. The budget earmarked $100 million for e-government over four years,$10 million in fiscal 2002,"which amounts to a wedge into a very expensive transformation," Caldwell said.

Still, factors such as a slow economy and the recent attacks are impacting federal IT spending. Federal agencies traditionally complete nearly 30 percent of total IT purchases between July and October, as the fiscal year winds to a close.

"[The federal market] has been relatively flat year over year, and that was not surprising to us," said Bob Leclede, vice president and general manager of the government and education division at Ingram Micro. "The nice thing is, we have seen stability in this market year over year," Leclede said.

However, Ingram Micro has noticed a shift in product purchases for the federal government markets, Leclede said. Instead of focusing on systems, purchases have been centered on infrastructure, security and storage solutions, which reflects a "maturing of the market," he said.

Without any major new technologies or applications, federal government agencies are concentrating on making networks more robust. Solution providers that want to be successful in this market need to have wide-ranging expertise in hardware, software, integration, maintenance and support, Leclede said.

At the state and local government level, many agencies are still focusing on e-commerce applications and those that provide a service to the citizen, such as online driver's licenses renewal. The state market, in which Ingram Micro has seen nearly 25 percent growth a year in hardware and software opportunities, is still roughly three to five years behind the federal market, Leclede said.

"Until midyear, [state agencies] were going like gangbusters," Leclede said, adding that the buying season for 42 states runs from April to June. "But now, we're watching a lot of budget shifting going on."

In the education market, "people are trying to adapt technology and employ it," Leclede said.

Higher-education institutions are investing heavily in wireless deployments, handheld devices and network security, Ingram Micro said. "Higher education is a very high adopter of new technology," Leclede said. "They have the dollars, and [the market] is stable. I look to them as the future generation of what IT will look like."

Ingram Micro supports government and education solution providers through its Partnership America program. The distributor also offers solution providers special pricing, terms and conditions, contracts, lead generation and helps ensure that they comply with government policies. Tech Data also offers similar services through its TechSelect Government program.