In today’s federal government IT market, solutions vendors have to be both financial and acquisition experts. In addition to informing oneself about budget projections, anyone trying to sell into government needs to be aware of specific hurdles they will have to overcome.
The total proposed IT spend for the federal government is approximately $80 billion for 2015, but that doesn’t include the spend for judiciary halls and the court system, independent agencies like the Federal Reserve and the postal service, nor the spend in the intelligence side of the government. When you put it all together, the IT spend for the federal government should be more than $100 billion.
Where and how the government will spend those dollars? Alan Balutis, Director of Federal IBSG for Cisco, moderated a panel discussion with David Wennergren, Senior VP of Technology, Professional Services Council; Jim Williams, President, Williams-Schambach; and Dave McClure, Chief Strategist, Veris Group recently to discuss this topic at Comstor’s Federal Executive Summit.
Balutis outlined the budget further, saying that “of the $100+ billion that is projected for IT in the federal government, the cyber spend in President Obama’s budget for 2016 is projected to be close to $14 billion. The breakout of cloud makes up 7.5 percent of the total spend, which they say is comparable to the spend in the private sector. Of great import to those who sell to the federal government is that the budget includes a 7 percent increase in projected spending for the Department of Defense, a 7 percent increase in projected spending by civilian agencies and a 2.5-percent increase in overall IT spend. Since the budget has been flat for the past few years, there was great joy when the budget was released.”
What government vendors need to remember is that the vast majority of the IT spend today is, unfortunately, to maintain legacy systems. Wennergren shared that in his experience, some federal agencies spend as much as 80 percent of their IT budget on preserving the legacy, rather than working on the new. As he said, this is not a viable strategy in the long term. “If you couple the tough financial times that continue to be with us on top of that, it makes for a peculiar market. Spending levels have been steady for several years, but at the end of this federal year, sequestration is looming again,” Wennergren shared. “The President’s budget for defense and non-defense is significantly above what we have seen, and the good news is that sequestration levels going forward are higher than what they were in 2013,” he continued. “But there will be turmoil in the market because people will be reluctant to spend until they are sure they are going to have the money. What I see is a challenging time where government is starting to recognize that there are different ways you can buy things to take advantage of funding uncertainty, but you have to be comfortable about asking for that.”
Williams’ take on the budget also focused on spending levels, but he urged vendors trying to sell into the government to remember that “the number one priority for the federal government is cyber . For all of these other things they are considering – customer service, mobility, big data – what they don’t want is a breach on their watch.” Williams sees IT as a priority for the government and pointed out that in the IT arena, for the last 20 years, Congress has actually put more money into IT than was requested by the president. “IT has remained an investment area for both parties,” Williams said.
Williams called this encouraging while urging the audience to remember that the Federal Information Technology Acquisition Reform Act (FITARA) puts more emphasis on the CIO’s authority over the budget formulation phase for agencies, so they must ensure they are able to engage at that level.
McClure offered a bit of a different take on the discussion. He reminded panel members and the audience that some areas of the budget have experienced deep cuts. He also said that the mandate to find the “lowest priced, technically acceptable solution” is making it very difficult for the government to buy innovation. “It is very hard for them to get the best solution available, when 70 percent of the procurement process is focused on LPTA,” McClure shared. “Price shouldn’t be the most important element of the discussion, but, unfortunately, it is.”
McClure went on to say that data is the “new lifeblood” for IT. “Data is becoming the focus for the transparency revolution in government,” McClure shared. Because of this, he encouraged audience members to remember, “We can’t build cloud systems, and we can’t segment into hybrid and private systems if we don’t have good data governance and data categorization systems.”
Good solutions and product suites are the answer. However, as all the panelists alluded to, the acquisition process in the federal government has become a “stickler.” McClure said, “… the acquisition process is stuck in the past. It was created around products not services, so you have an acquisition workforce that is not well trained in buying services, buying by the drink or buying in times of uncertainty.”
So, as you think about how you are tapping into the federal IT market, make sure that you understand the budget priorities, processes, how it will evolve and make sure you are prepared.
