Public Sector VARs Will Feel The ROI Heat, Says Researcher
"Making sure your solutions meet objective is really key here," said Deniece Peterson, manager, industry analysis, at government IT researcher Input.
Addressing public sector solution providers Wednesday at Tech Data's Tech EDG conference in Arlington, Va., Peterson said the solution providers that would triumph in the current government IT spending climate, especially on the federal side, would be those who track technology refresh cycles and align both their specialties and their bids with the types of technologies the government craves.
She urged VARs to focus on solutions with embedded security features -- considering the federal government's stepped-up insistence on cybersecurity measures -- as well as streamline their bid and proposal processes to be as agile as possible.
Further, she said, VARs should align their short-term business development to government decision makers' stimulus priorities, and stick to tangible ROI.
"That's tangible, not soft or speculative ROI," Peterson said. "That means ROI that can be identified, captured and reallocated."
Government IT spending is increasing, she said -- on the federal side, Input's projected compound annual growth rate over five years is 5.3 percent -- but thanks to the Obama Administration's focus on efficiency and ROI, that's not necessarily widening the playing field the way many public sector VARs hope it is.
And on the state and local side, it's not that many state procurement officials want to spend a lot more on technology as they are forced to do so to make up for staff and budget cuts.
"They use technology to get things done that they don't have the staff to do," Peterson said. "The key will be if they're still in a decent state when the stimulus money goes away -- when they're off the training wheels."
VARs, said Peterson, should pay special attention to the Obama Administration's four major technology priorities: energy conservation, health care, broadband and cybersecurity.
The advance of cloud computing into government IT is also no myth, she said, seeing as how there are pilot programs for cloud infrastructure in government already in place, and that administration officials are looking to make cloud consideration -- that is, evaluating whether a cloud-deployed solution could meet a technology need -- a mandate.
Further, Peterson said, data center consolidation would continue to be big: the government was under pressure to consolidate its 1,100-or-so data centers. One of the problems, she explained, is that the government's definition of "data center" -- usually defined by square footage and servers -- isn't always clear.
Contract reform is also something that could hit many public sector VARs where it hurts, Peterson said. The Obama Administration is looking to reduce federal contractor spending by as much as 7 percent over the next two years, and also shift contracting models toward firm-fixed pricing, where the burden of accountability is shifted more to the contractor to deliver on what's promised.
Look for a continued rise in task-order vehicles such as DHS EAGLE (Enterprise Acquisition Gateway For Leading-Edge Solutions), through which agencies can be flexible in picking a pool of vendors once and then putting through task orders on those contracts, rather than re-evaluate vendors and bids every time they need to buy something.
That kind of contract structuring could easily take business away from General Services Administration (GSA) and Government-Wide Acquisition Contracts (GWAC), and the VARs that rely on them, Peterson said.
VARs should also be concerned about the government's stated interested in "insourcing" -- that is, bringing more of its IT processes in-house. But that's probably a red herring, Peterson suggested, given that staff cuts and inefficient processes in government make outsourcing processes and business intelligence a lot more reliable in the short-term.
On the state and local side, according to Input, the major priorities for procurement officials are public safety force multipliers (such as networking and wireless, voice and video gear), waste fraud and abuse prevention measures, IT infrastructure consolidation, decision support tools (such as business intelligence analytics) and tools to assist community supervision for non-violent offenders (such as GPS monitoring and mobile case management).
Input's predicted compound annual growth rate for state and local spending over the next five years is 3.9 percent.
"We're pleased about that because it is growth, in an environment where you wouldn't expect it," Peterson said. "But they are spending money on technology to help save money on other things."
In the future, Peterson added, VARs should expect fewer super-sized state and local opportunities, as the state and local governments look to break up contracts into more bite sized, technology-specific pieces.
"The pipeline will be less predictable but that doesn't mean there won't be opportunities," she said. "We recommend casting the broadest net you can."
For Tech Data, the changing nature of government contracts and the need for solutions that embrace cloud, cybersecurity and other hot topics is a golden opportunity for both the distributor and its VARs.
Tech Data has been adding a number of tools to its public sector VAR resources, including MyGovBids, which allows resellers to access and organize the active public sector bids they have for easy viewing.
"The fact is we did so many last year that there needed to be a record of what was where," said Barb Miller, vice president of government, technical and integration services at the distributor.
Miller said that new opportunity for VARs many existing contracts was slim, seeing as stimulus funds, especially for infrastructure and health care, were flowing through existing contract vehicles.
But VARs who think local -- school systems, physician practices, government branch offices -- are having a much easier time with new business, because contracts aren't usually as complex and those organizations are looking for technology to offset staffing and resource shortages, she explained.