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Federal integrators never possessed the sizzle that surrounded their commercial counterparts during the dot-com gold-rush days. But today, they have something many private-sector integrators lack: steady work.
Thats why the phones of Beltway integrators have been especially busy in recent weeks. Federal contractors report that commercially oriented integrators, communications companies and product vendors are asking about partnering arrangements. The attraction: an information technology market with a $40 billion-plus budget.
Phones Ringing “Weve had a number of companies in Northern Virginia call us up in the last 60 days,” says Ray Oleson, CEO of SI International Inc., a federal integrator in McLean, Va. Commercial integrators have approached SI International about subcontracting arrangements and, in some cases, have expressed interest in selling their companies.
Oleson cites the example of a 150-person company hoping to employ the 45 people it had on the bench. “Its brutal out there,” he says. SI International is now negotiating subcontracting agreements with a couple of integrators. Oleson hopes to lock onto Internet-related skills that were hard to come by just a few months ago.
But commercial integrators arent the only ones dialing for federal dollars.
Mike Fox, VP of corporate development at SRA International Inc., a federal integrator in Fairfax, Va., says hes getting calls from Internet services companies, such as XO Communications, and product vendors seeking federal work.
However, Fox says the downturn in the commercial market is only part of the story. He notes that government agencies are considering commercially available products for projects that traditionally had been custom development jobs. “Theres more and more pull for commercial-like technologies and products,” he says.
He adds that SRA is doing more work than ever before with commercial vendors such as Plumtree Software Inc., a maker of corporate portal software. SRA also is partnering with Oracle for its customer relationship management wares.
Only Way In Companies may be motivated to enter the federal market for different reasons. But industry executives agree that the easiest way to open Uncle Sams door is through partnering. Established federal contractors are the key conduit through which products and services flow into government agencies. They provide access to the numerous governmentwide acquisition vehicles (GWACs in fed speak) that offer products and services to multiple federal agencies.
SRAs Fox notes that many of the companies calling him lack GWACs or other prominent federal contracting vehicles. For them, “the only way in is through an integrator,” he says.
Jim Kane, president and CEO of Federal Sources Inc., a McLean-based government market research firm, agrees.
“Its very difficult to come into this space and go it alone,” says Kane, who adds that just finding your way around the government market can be a challenge. “Its much more efficient to work with a partner,” he explains.
Commerce One, an e-marketplace specialist, is pushing into the federal government with the help of partners. The company earlier this year captured a contract with the Naval Sea Systems Command to develop a private e-marketplace for managing contracts. And although Commerce One is prime contractor on the deal, the company is backed by government contracting stalwarts Computer Sciences Corp. and IBM. In another move to bolster its federal position, Commerce One in March hired Paul Brubaker, formerly the Defense Departments deputy chief information officer, to head its e-government activities.
And last week, SME Corp., a San Rafael, Calif., project management solutions provider, announced an alliance with EDS Corp. that will get it involved in a $7 billion Navy/Marine Corps contract. EDS plans to use SMEs Project InVision, a project management tool, in its Navy/Marine Corps intranet project.
The EDS deal marks the companys first major foray into the government market, says Matthew Meblin, CEO of SME, which typically deals with Fortune 500 companies such as MobilExxon. He says the company considered other approaches to the federal sector but decided on partnering. “For a small company, thats one of the most cost-effective ways to be able to break into this market,” he says.
Companies with potential to succeed in the federal market include B2B companies for which the government is “one more vertical where they can leverage some good systems or processes that they have,” Kane says.
Solutions providers focused on logistics also may be candidates for federal work, says Stan Jaworski, VP at Symbol Technologies. He says a handful of its reseller partners have “asked to be enabled to go into that market.”
Symbol manufactures mobile computing devices that resellers deploy in warehousing, among other applications. Jaworski notes that managing a government supply chain doesnt differ in principle from managing a retail pipeline. Thus, government logistics applications are “an extension of the general marketplace,” Jaworski says.
Take Caution
Despite the benefits of federal partnering, there are pitfalls for both the new market entrant and those who would ally with them. SI Internationals Oleson says the potential partners staying power is a consideration. He wants the subcontractors he hires to be around to finish the job.
And those seeking government work shouldnt expect the halls of government to be dripping in dollars. Although the IT market is huge, the governments budget forecast has it growing at about 1 percent in fiscal year 2002, which starts Oct. 1. Kane expects the actual increase to be a bit bigger, as funds are reallocated during the year. The market still wont see the 7 percent to 9 percent growth experienced over the last couple of years, he adds.
Novice government marketers also must recognize that the federal sector—despite years of procurement reform—still has its own particular nuances. Offerings that sell in the commercial space may not readily translate into the federal market.
For instance, Zip Brown, VP of the E-government Solutions Group at American Management Systems Inc. (AMS), says her company realized it had to “federalize” Aribas e-procurement software to work in the federal space, with its specialized procurement rules and reporting requirements.
AMS performed a gap analysis to identify the missing government ingredients and created a federal market version of Ariba, which the companies are now marketing to agencies.
In other situations, solutions that appear to be a good federal fit simply dont take off. SRAs teaming arrangement with Kana Communications, which has delivered many e-mail routing and response systems to such commercial clients as eBay, provides one example. SRA and Kana believed the federal market might be a natural fit for e-mail routing solutions, based on the volume of correspondence that agencies receive.
But to date, the companies have only sold a one system. “Its still a different world,” says SRAs Fox.
Still, its a world commercial vendors appear driven to explore.