Government Shutdown: U.S. Tech Market Consequences


Phillip Walker, CEO of El Segundo, Calif.-based Network Solutions Provider USA, believes the shutdown and sequestration combination might possibly lead to consolidation for federal solution providers.

"The shutdown has caused a lot of paranoia and uncertainty in the market," said Walker. "You have to make a decision one way or another. There are solution providers who only do government and have very little private clients; they'll need to venture out. If sequestration takes away 50 percent, you might need to scale back."

However, Walker said he remains wary and also hopes that the loss estimates Forrester predicted help keep solution providers from going "down that dark alley."

"I think that it's a sneaky number. What it's going to do is still unknown," said Walker. "Something else could balance it out, and right now that is what we have to deal with. It's not for certain."

For Frontier Technologies, 65 percent of its revenue now comes from the federal government, while 30 percent of revenue is generated from the private sector, said Frontier Technologies' Moorthy.

"We were a really big federal government provider; our mix was 90 percent federal work to 10 percent private sector at one time," said Moorthy. "Over the years and after 2008, we made a conscience decision to focus on the private sector."

Although government shutdowns happen and it's a part of business, VARs need to innovate in their businesses, he said.

"Many businesses may try to go the other way, but the bottom-line is the key to sustaining value and rebuilding your business," said Moorthy. "If you can do that, you just have to make things happen; survive now and wait for things to get better, which it will."

PUBLISHED OCT. 16, 2013