Landing Those Contracts
Given all those challenges, you'd think VARs would be tossing up their hands when it comes to trying to land government contracts. But VARs say opportunities are still there, especially for those who recognize that the rules of the game are changing.
These VARs are landing contracts and getting lucrative ripple-effect business even as the overall government market has presented a mixed picture in 2007: On the federal side, anticipated agency IT spending of $64.9 billion in 2007 represents a slight dip from the $66.2 billion spent in 2006, according to Input, a Reston, Va.-based industry research firm. The slight decline was mainly seen on the Department of Defense side. "Spending on war itself puts the most downward pressure on IT spending among the DoD agencies, as only the Navy saw an increase here," said John Slye, manager of federal industry analysis for Input.
For the immediate future, the news remains upbeat, as Input projects the federal totals to climb to $99 billion by 2012. That growth will be fueled by requiring better systems to replace the missing human assets as baby-boomer government employees retire; immigration reform; and the rising trend of agency-to-agency information sharing, among other factors cited by Input. Another positive development: The Office of Management and Budget has indicated that federal spending on IT initiatives will increase in fiscal 2008 to $65.5 billion.
The current and future state/local IT spending picture will grow to an anticipated $54.8 billion this year, up from $51 billion in 2006. State/local IT spending is projected to grow to $77.4 billion by 2012, in part due to the opening up of the federal General Services Administration Schedule purchasing to state and local government customers, which has grown to $248.5 million in fiscal year 2006, compared with $17.9 million in fiscal year 2003. Also credited for growing state/local IT sales are an anticipated decline in federal programs like No Child Left Behind that mandate state obligations while providing little or no funding; and, again, the retirement of baby boomers.
Even with a slight federal downturn this year, government-customer VARs are finding ways to grow their sales considerably by both exploiting opportunities in the still-booming state/local markets and finding still-strong niche markets within the federal customer base. Here are seven ways to "win" in the federal, state and local government marketplace, according to VARs who are doing just that:
1. Past performance may be your strongest marketing tool. No matter what size the government customer is, a VAR's reputation always counts when it comes to winning a contract. Heartland Technologies, a Harlan, Iowa-based VAR that sells Windows Vista solutions, found that positive word-of-mouth through its education customers has helped contribute to a growing niche that now accounts for one-quarter of its revenue.
"The education space is definitely one that is impacted by word-of-mouth," said Arlin Sorensen, CEO/partner at Heartland.
Word-of-mouth has also served AtTask well. The Orem, Utah-based VAR has parlayed its successful project-management solutions with a number of state and local customers into the federal space.
"When it came to winning a major federal Health and Human Services project, we were able to direct the customer to clients such as the New York City Department of Health, and the state universities of New York," said AtTask CEO Scott Johnson.
2. Sell on savings, not cost. Optimus Solutions, a Norcross, Ga.-based solution provider, is finding several niches in the state/local space, leading to contract wins focused on consolidation of voice networks, "green" initiatives and greater data-center efficiency. State and local customers see IT as a cost center, and IT solutions must be sold as a potential revenue-generating force, capable of driving more citizens to agencies to spend money.
"Our biggest challenge is budget shortfalls," said David Evans, director of midmarket sales for Optimus. "We get around this by encouraging leases to free up funding. But you need to prove return on investment, too, so we provide to the customer a view of the solution's three-year cost and compare it to what they're spending now on existing technology. When you show that they'll save up to $30,000 a year over three years, it leads to a different response than, 'Why am I spending $400,000?'"
Next: 3. Do your homework. 3. Do your homework. One way to land these contracts is to keep up with policy and political shifts that affect spending. Optimus sales forces have stayed on top of the "E-Rate for Schools" federal program, for example.
E-rate provides funding for technology based on the amount of school lunches distributed per jurisdiction, attempting to provide more funding in areas where students may be struggling. "There are a lot of regulations that you have to understand, so, by partnering with them, you get a clear sense of the landscape," Evans said. "Without understanding it, you can't sell it. There are a lot of regulations with the county board of commissioners and the city halls that have control over the budget. They will ultimately say this has to be done a specific way. That's a lot of hoops that you have to jump through. If you know them, you can do it. If you don't, you will fail."
4. Consider narrowing focus to maximize results. Knight Point Systems, a Herndon, Va.-based solution provider, is seeing 11-fold government sales growth over 2006, landing big federal contracts with the Treasury's Financial Management Service, the U.S. Department of Labor and the Department of Homeland Security, among others. It has done so by focusing on the classic up-and-comer, the "hot" vendor with a strong product that can be sold in a market space that also is gaining ground quickly. For Knight Point, that vendor is Scalent Systems, which provides virtualization, automation capabilities, data center management and other needs to federal customers. Still, even with the perceived "magic bullet" vendor product, a VAR needs to be well-versed in the customers' business and regulatory culture to land the big win.
"We'll choose a hot, emerging company over a big one every time," said Bob Eisiminger, president and CEO of Knight Point. "When we can see that their technology is a big winner, it makes us a big winner as well. But to do so, we've also had to become students of the federal government contracting process, like the Service Disabled Veteran-Owned Business laws."
By narrowing your offerings, you're in a better position to establish yourself as an expert. McLean, Va.-based TVAR Solutions was launched last year and is already a multimillion-dollar, government-focused VAR because it has zeroed in on the information-protection market.
"By keying in on this area, we can focus on ensuring the customer's data—be it e-mail, messaging traffic or mission application data—is always available and protected from threats that are electronic, physical and sometimes internal in nature," said Dave Saunders, president/CEO of TVAR Solutions. "Government customers want to work with solution providers who are experts in their specific part of the industry, and can provide straightforward solutions to complex challenges."
5. Stick with vendors you know and trust. En-Net Services, a Frederick, Md.-based VAR, is seeing success with DoD customers thanks, in part, to its relationship with Lumension Security (formerly PatchLink), a Scottsdale, Ariz.-based vendor.
"The trust needs to be there for the VAR sales team to have confidence in closing the orders they're promoting," said Kyle Yost, general manager at En-Net. "If we're buying through the channel but have to compete against a direct sales team, our reps tend to shy away from that product line."
6. Take inventory of your talent. Avineon, an Alexandria, Va.-based solution provider specializing in program management and other IT products for more than 250 government agency customers, is seeing more than 30 percent annual growth in the last five years. For Avineon, big wins this year included software development and information security projects for the Internal Revenue Service, and a critical U.S. Mint security engineering contract. The "Inside the Beltway" competition for federal sales is fierce, with more VARs seeking a place in a market that's not growing with the same strength as state/local. To get an edge, Avineon looks to its human assets. For a contract with the Naval Flight Information Group, it's paid off. An aggressive recruitment plan—with 100 percent payment of the health and dental plan and subsidized transportation, among other highlights—has helped land top procedure specialists and aeronautical experts.
"They're helping our client meet FAA and DoD standards," said Charles Erdrich, vice president of business development for Avineon. "They're accessing data to evaluate man-made and natural obstructions in flight paths, to provide the correct path for Naval and Marine Corps aviators worldwide. And, with that information, we're automating the system for the client using GIS software. All of this started out as a small project, and has only grown every year to exceed our expectations."
7. Take advantage of the open marketplace. Since the 1990s, federal government agencies have loosened up purchase procedures, and are now allowed to buy freely and directly from VARs off the GSA Schedule. Docusure, a solution provider in San Diego, landed an important federal customer overseeing probate courts that has led to a steady flow of other business, thanks to the GSA. The court system needed to standardize imaging systems on a single platform to allow easier transfer of information between locations. So that federal customer is buying Docusure's solution, which features document-security/storage/access software from Denver-based vendor Digitech Systems.
"The GSA checks your past performance, price and financials," said Richard Berlin, president of Docusure. "That way, any government entity looking to buy that type of product can be comfortable making a purchase, knowing that you are approved to do business with them. We installed about a dozen of these solutions at U.S. probate courts, and have more orders pending. And, now, thanks to the GSA purchasing setup, we're doing the same for a number of military customers in their various locations."
Next: The Product/Solution Lowdown THE PRODUCT/SOLUTION LOWDOWN
PRODUCT/SOLUTION: VMware from Optimus, running on blade technology with centralized storage
GOVERNMENT MARKET: States and counties/towns where IT support services are limited, with a high need for disaster recovery, capacity and ability to grow
PRODUCT/SOLUTION: Scalent Systems running on Dell servers from solution provider Knight Point Systems
GOVERNMENT MARKET: Federal customers in Treasury, Labor and DHS, among others
PRODUCT/SOLUTION: @Task project management solutions from AtTask, running on either in-house, on-premise models or hosted in SaaS format
GOVERNMENT MARKET: Department of Health and Human Services, U.S. House of Representatives, New York City Department of Health and state university customers
PRODUCT/SOLUTION: Sanctuary Device Control from Lumension Security, a security solution sold by En-Net Services to run on networks, servers and workstations
GOVERNMENT MARKET: Department of Defense (DoD) customers
PRODUCT/SOLUTION: Office Communication Server 2007 from Heartland Technologies, running on Windows Server 2003 R2
GOVERNMENT MARKET: Public schools
PRODUCT/SOLUTION: PaperFlow from Digitech Systems, as sold by Docusure, running on Fujitsu scanners
GOVERNMENT MARKET: U.S. probate courts and DoD customers
PRODUCT/SOLUTION: Symantec AntiVirus solution implemented by TVAR Solutions, running on desktops/laptops with Windows and Apple operating systems
GOVERNMENT MARKET: DoD agencies