Where the Money Is

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His negotiating skills honed by years of working on both the legislative and bureaucratic sides of state government, New York's recently appointed CIO, James T. Dillon, knows exactly what he wants to hear when systems integrators approach, looking to do business with the state's Office for Technology. Suffice it to say, neither unrealistic promises nor double-talk are high on Dillon's list.

Cast in alphabetical terms, Dillon prefers vendors that come to his office with every t crossed, every i dotted and the particulars of every proposal covered from A to Z. If that means they'll have to conspire with the "enemy," then so be it.

"I expect them to come to me with all aspects of the bid already covered, even if that means working with a competitor or someone they don't like," Dillon says. A former state labor commissioner, tapped earlier this year by Gov. George Pataki to serve as New York's first-ever CIO, Dillon is far from alone in his thinking.

Carolyn Purcell, head of the Texas Department of Information Resources, is another CIO who places the onus for developing comprehensive IT programs squarely on the private sector. "I am not particularly interested in finding business for a vendor," she says. "The vendor should know the state [and what opportunities fit its strengths."

Blunt and to the point, the advice to potential vendors from two of the nation's largest procurers of IT contracts still fails to address some of the larger factors that might cause VARs, especially smaller companies, to avoid doing business with state governments.

For one, a contract with a government,any government,inevitably means entering, at the very least tangentially, the partisan fray. "There's a political challenge that exists in the public sector that isn't as much a part of the private sector," points out Ron Salluzzo, a senior vice president for state and local government practices at KPMG Consulting.

More intimidating than politics is the prospect of fighting through a maze of red tape. Given that ordinary citizens,a population that includes systems integrators,are generally exposed to the excruciatingly sluggish pace of state government only when applying for and renewing driver's licenses at the local DMV office, some would say VARs have good reason to be daunted.

"I think there are a lot of differences between public contracting and private contracting. Some of the things are good, and some of the things make the job a lot more harrowing. If that weren't the case, you would have a lot more people doing government business," says Jerry Boerner, vice president of marketing for the Global Public Sector Group at Unisys, citing as examples myriad accounting rules, equal-opportunity hiring requirements and liability issues.

Know Your Customer

It doesn't have to be that way, says David Lewis, CIO for the Commonwealth of Massachusetts. "I think whether you're large or small, you've got to understand that doing business with the government is not just responding to bids. It's going out and becoming familiar with what people need and want." State agencies are all different, Lewis says. "They're like little individual companies. Some agencies are extremely adept and know what they're looking for coming out of the box. And there are other agencies totally at the other end of the spectrum where,particularly because we do central funding for a lot of IT projects,they really need help in figuring out exactly what they ought to do."

Comparatively speaking, the process by which VARs step in is a relatively painless ordeal. After all, at base level, doing business with the government requires but a rudimentary understanding of a principle learned in Economics 101: the axiom of maximum output delivered at the lowest possible price.

Although the bidding process remains paramount to getting government contracts, the experience side of the equation cannot be minimized, Lewis says. "Like it or not, a lot of government work is done on personal knowledge and associations," he says. "If a vendor has done work for you before or has done work for another agency and has been successful at it, then there is a trust factor there."

In Iowa, the trust factor is an integral part of the transaction. "What we try to do is put experience into our bidding process," says Tom Shepherd, CIO of the state's department of IT. "We want to see how many projects you've had. We try to weigh that into the bidding process, so we can present that into a competitive bid."

Yet, as Marty Dunning, operations manager for Sun Microsystems' state and local government unit notes, once a company establishes itself, that cumulative weight is its own reward. "Generally speaking, [government contracts have been a consistent source of revenue. Once you establish your credibility and relationships, it can turn almost into an annuity," he says.

The emphasis on experience should not be construed as a signal for emerging companies to stay away. That goes without saying because every project demands a specific function, and every contract must stand on its own merits, Lewis says. Therefore, for every business-process engineering bid requiring specialized personnel, there are countless, straight coding projects that demand not much beyond "a lot of bodies" to fulfill the terms of the contract.

"In some of the areas we deal with, you have to be willing to look at smaller vendors and, in many cases, it is preferable," Lewis says. "The small vendor who is very focused will many times give you a lot more vending for the dollar."

While in Massachusetts smaller companies are the beneficiaries of the majority of IT dollars spent on upgrading security systems, it was a large and established governmental vendor,Titan Systems,the Commonwealth turned to earlier this year to restructure the portal by which its citizens now access the statewide Web site. And when the district attorneys representing eight out of 11 prosecutory jurisdictions across the state decided to pool resources, Lewis' department coordinated the effort between an independent IT specialist hired by the organization and Unisys, the contractor brought in to facilitate the system. "Sometimes, it's not just about technology, and it's not just about a specific vendor," he says.

Echoing Dillon, other CIOs prefer contractors that approach them with sound business plans that cover all the bases.

"Do your homework," Texas' Purcell warns. By that, she means take careful note of the procedures, protocols and payment schedules spelled out on the state's IT Web site. Most of the 50 states, as well as the District of Columbia, have made contractual stipulations and current projects accessible via the links on the official Web site of the National Association of State Chief Information Officers, www.nascio.org.

A potential vendor who has identified a viable project via the Internet should then arrange a face-to-face meeting with key personnel to further discuss the project's parameters.

As he starts out in his new position, Dillon vows he'll "talk to anyone at least once." During the initial meeting, a vendor must provide ample reason for a follow-up session. While Dillon is not interested in proposals that might eventually cause a systems integrator to regroup or raid the competition in order to fulfill the terms of a contract, Iowa's Shepherd says he is willing to listen to vendors who are honest about their shortcomings.

"If they can only do A to C, and they do it extremely well, then we will be willing to buy them. But typically,and this is not an indictment of consultants or vendors,they spend a fair amount of time trying to get their next piece of business. The danger they run into is sometimes they deliver to customers what they want and not what they need," Shepherd says.

Adds Lewis: "There is nobody who can deliver the stars and the moon. That is just foolishness when someone tells you that. Sometimes, you just want to ask them, 'What is the last big project you did, and what were the major problems with it?' There are no pat answers to these things. Nor does it do any good to fudge past performance," he says. "When you stand back and think what happens when due diligence causes a state to call a vendor's references, those are exactly the type of questions [a procurer is going to ask."

In Texas, the screening process ascertains not only the reputation of contractors in other states but also the financial resources supporting a VAR, Purcell says. Acknowledging that the CIOs are ultimately accountable to the taxpayers, vendors should expect nothing less from IT departments entrusted with spending public money, KPMG's Salluzzo says.

In Massachusetts, Lewis factors in the anomalies that differentiate the business practices and IT requirements among the 50 states. What works in Georgia, he reasons, may not necessarily be effective in Massachusetts, and vice versa.

Accordingly, an ambitious project undertaken in a primarily rural Midwestern state,Iowa, for instance,would not be as easy to implement in a more densely populated state.

As it happens, Iowa is in the midst of implementing such an initiative. Upon completion, the 21st Century Learning Infrastructure will deliver digitized educational material,including books and multimedia tools,to every school, library and private residence in the state with Internet access.

To build the infrastructure and storage network, the Iowa IT team, in conjunction with the technology team at Northern Iowa University, has established a coalition that includes its own resources, regional and municipal library and education personnel, corporate stalwarts,including IBM, Microsoft and Cisco Systems,and a host of content vendors.

Pointing specifically to the monumental effort mounted to obtain enterprise licenses for reading and multimedia resources, Shepherd predicts the other 49 states will be the ultimate beneficiaries of Iowa's initiative in terms of both technology and the appropriation of public money. VARs will benefit as well. "It will decrease the legwork for the vendors, because once they've licensed products for everyone in the state of Iowa, they can move on to the other 49 states. They'll get a bigger bite of the apple%85it's more unit cost, but they'll spend less money on overhead trying to get every area educational agency to combine into it," he says.

While undertakings such as the 21st Century Learning Infrastructure cause CIOs to wax warm and fuzzy, the other side of the realm is brooked by those vendors delivering expectations far beyond actual performance. Although Dillon's tenure has been relatively brief, he offers a few words of caution to systems integrators who don't follow through: "I have a long memory."

In Iowa, Shepherd says, "It's kind of a binary process. We either want you back, or we definitely don't. It's like a blind date. We're not lukewarm with anyone after the first date. We have some providers that have excellently leveraged themselves to our best advantage, and we have had other engagements where we have been told, 'This is the ultimate snake oil, it will automate everything and make it work just fine, fine, fine.' And when they delivered the initial code and we had a chance to work through it and parse it out, it turned out to be junk," he recalls. "It was a cookie-cutter approach. And you can't do cookie-cutter in today's world, because you're trying to forge paths into new areas."

While vendors certainly are not averse to tailoring IT solutions to meet the diverse needs of each state government, when it comes to payment and vending schedules, some providers are embracing a uniform reimbursement plan established in Florida. Already, Boerner says, Unisys has been able to streamline its process by taking advantage of payment and vending schedules in Ohio modeled after those in Florida. "Slowly but surely, nirvana would be reaching the point where there would be standardization across all of the states. Whether we ever reach that [point I don't know, but it looks like we're moving in that direction," he says.

One area where disparities are already narrowing is vendor payment. Lewis says his department, required to pay within 45 days, tries to compensate within 30 days. Increasingly, Boerner adds, Unisys is seeing payment schedules based on performance. Conversely, Dunning says, progress payments from state governments are no longer as common as they were years ago.

And while the bottom line isn't the sole determinant motivating vendors to land state business, the almighty dollar's importance cannot be minimized.

As New York puts a plethora of major projects out for bid,including a statewide police communications network, a time-and-attendance personnel-monitoring system and an upgrade of the multisystem compendiums used by the human resources department,Dillon is asked why it is worthwhile for a vendor to overlook the red tape to pursue business with his office.

"Because we spend a lot of money," Dillon responds, effortlessly recasting the sentiment in terms only a bureaucrat could love: "Let me amend that. The importance of IT to state operations and, ultimately, to provision services to the state's citizens has grown to the point that we are a major purchaser."

Stephen Giegerich is a freelance writer based in Locust, N.J. He can be reached at stevegieg@yahoo.com.

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