Federal Market Offers Big Opportunities For Small VARs

Gloria Berthold, president of TargetGov, an Elkridge, Md., consulting company that shows companies how to sell to the federal government, gave that message of hope to public-sector VARs at Everything Channel's recent XChange Government Integrator conference outside Washington, D.C.

There is a formula for small solution providers trying to weave their way through federal bureaucracy in order to get a piece of the government's IT spend, pegged at $400 billion last year, said Berthold. The most important thing is to establish an identity that helps you stand out in the eyes of federal officials holding the IT purse strings.

"There is a sea of IT companies knocking on their door looking for a handout; that's how they think of us," she said.

Any solution related to security as a huge opportunity for solution providers, she added. "In real estate it's location, location, location. In the federal government, it's security, security, security."

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Mohamed Elrefai, vice president, Enterprise Solutions Group at GTSI, a public-sector solution provider in Chantilly, Va., agreed that security is in high demand within federal agencies. But he said solution providers need to think of the federal government more as a midmarket opportunity than as a giant enterprise reserved only for large integrators.

Elrefai said GTSI found a cybersecurity opportunity within a department of the U.S. Navy in which the department was charged with monitoring some 1 billion transactions daily. "But they had no money. They had a mission, but how could they get it done?" he said.

What GTSI did was to offer a per-transaction-fee solution for about $300,000 per month, which saved the Navy infrastructure costs and made the solution feasible.

In her presentation, Berthold said smaller solution providers targeting the federal government must craft capability statements, a one- or two-page document outlining the company's history, core competencies and work history. The statement needs to be rewritten, she added, for each proposal so that it is tailored to the specific task at the specific government agency.

"If you don't have the experience that's exactly related to what the agency needs, don't even walk through that door because you won't get the work," she said.

Berthold also said the capability statement should never be posted on the solution provider's Web site. She suggested crafting an online statement that contains nothing but searchable keyword terms that will show up on search engines as procurement offices search the Web.

Berthold noted that the trend in federal contracts has been to consolidate numerous, often disparate contracts, into single, large contracts. The upshot is that often, no one solution provider, no matter how large, can handle the contract on his or her own. This creates a tremendous subcontracting opportunity, especially for firms that have diversity status.

But some solution providers were skeptical. "Every federal contract I've won is through people I know. I've not won one contract because of my diversity status," said James Scholz, president of CSCI, a security consulting firm in Warensburg, Mo., that has Native American and veteran diversity status. He said the bulk of the contracts set aside for small diversity partners ultimately go to big business. But Berthold told small IT solution providers not to give up hope. She noted that 95 percent of the $400 billion in federal IT spending last year was for contracts valued at $2,500 or less.

Meanwhile, solution providers note that election year politics are certain to impact federal IT spending. Public-sector VARs focused on the federal market point out that with a new administration taking over in Washington early next year government agencies are racing to spend their IT dollars in a run-up to the November election.

"I've told our CEO that until November we are going to be like a bear preparing for hibernation; we're going to fatten up," said Michael Fox, senior vice president, director of sales and marketing, at SRA International, Fairfax, Va.

After the election, Fox predicts that federal IT spending could significantly slow as the new administration sets its priorities, puts new people in place and puts its mark on federal spending. Fox says the 2011 federal budget will be the first one where the new administration can exert its spending priorities.

Beyond that, Fox sees significantly longer sales cycles, which he blames on a lack of skilled procurement officials in the government. "The sales cycles are dragging out. An RFP takes two to three times longer to get out because the [procurement officers] are gun-shy," he said.

He said that because RFPs put out by some government agencies aren't as well-crafted as they have been in the past, there are a growing number of protests once a contract has been awarded, which contributes to a cycle that delays future contracts.