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The federal IT spending budget has shrunk. When it comes to unfunded mandates, national programs like No Child Left Behind leave regional lawmakers feeling more like No State Left Unsqueezed. And local government customers are quick to take issue with the high price tag of large IT projects.
Given all those challenges, you'd think VARs would be tossing up their hands when it comes to trying to land government contracts. But VARs say opportunities are still there, especially for those who recognize that the rules of the game are changing.
These VARs are landing contracts and getting lucrative ripple-effect business even as the overall government market has presented a mixed picture in 2007: On the federal side, anticipated agency IT spending of $64.9 billion in 2007 represents a slight dip from the $66.2 billion spent in 2006, according to Input, a Reston, Va.-based industry research firm. The slight decline was mainly seen on the Department of Defense side. "Spending on war itself puts the most downward pressure on IT spending among the DoD agencies, as only the Navy saw an increase here," said John Slye, manager of federal industry analysis for Input.
For the immediate future, the news remains upbeat, as Input projects the federal totals to climb to $99 billion by 2012. That growth will be fueled by requiring better systems to replace the missing human assets as baby-boomer government employees retire; immigration reform; and the rising trend of agency-to-agency information sharing, among other factors cited by Input. Another positive development: The Office of Management and Budget has indicated that federal spending on IT initiatives will increase in fiscal 2008 to $65.5 billion.
The current and future state/local IT spending picture will grow to an anticipated $54.8 billion this year, up from $51 billion in 2006. State/local IT spending is projected to grow to $77.4 billion by 2012, in part due to the opening up of the federal General Services Administration Schedule purchasing to state and local government customers, which has grown to $248.5 million in fiscal year 2006, compared with $17.9 million in fiscal year 2003. Also credited for growing state/local IT sales are an anticipated decline in federal programs like No Child Left Behind that mandate state obligations while providing little or no funding; and, again, the retirement of baby boomers.
Even with a slight federal downturn this year, government-customer VARs are finding ways to grow their sales considerably by both exploiting opportunities in the still-booming state/local markets and finding still-strong niche markets within the federal customer base. Here are seven ways to "win" in the federal, state and local government marketplace, according to VARs who are doing just that:
1. Past performance may be your strongest marketing tool. No matter what size the government customer is, a VAR's reputation always counts when it comes to winning a contract. Heartland Technologies, a Harlan, Iowa-based VAR that sells Windows Vista solutions, found that positive word-of-mouth through its education customers has helped contribute to a growing niche that now accounts for one-quarter of its revenue.
"The education space is definitely one that is impacted by word-of-mouth," said Arlin Sorensen, CEO/partner at Heartland.
Word-of-mouth has also served AtTask well. The Orem, Utah-based VAR has parlayed its successful project-management solutions with a number of state and local customers into the federal space.
"When it came to winning a major federal Health and Human Services project, we were able to direct the customer to clients such as the New York City Department of Health, and the state universities of New York," said AtTask CEO Scott Johnson.
2. Sell on savings, not cost. Optimus Solutions, a Norcross, Ga.-based solution provider, is finding several niches in the state/local space, leading to contract wins focused on consolidation of voice networks, "green" initiatives and greater data-center efficiency. State and local customers see IT as a cost center, and IT solutions must be sold as a potential revenue-generating force, capable of driving more citizens to agencies to spend money.
"Our biggest challenge is budget shortfalls," said David Evans, director of midmarket sales for Optimus. "We get around this by encouraging leases to free up funding. But you need to prove return on investment, too, so we provide to the customer a view of the solution's three-year cost and compare it to what they're spending now on existing technology. When you show that they'll save up to $30,000 a year over three years, it leads to a different response than, 'Why am I spending $400,000?'"
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