Stimulus: The Buck Starts Here

Sure, the American Recovery and Reinvestment Act's passage in January 2009 promised a boon of opportunity for the IT sector. But in recent weeks, as the stimulus money began to flow and VARs came to the realization that bags of cash weren't going to be raining from the sky, the excitement turned to skepticism. From many channel corners, reaction to stimulus has had a familiar ring: Curb your enthusiasm.

"Money is available, but it may be smaller than you expected, and it's going to be hard to get at. You're going to have to do some real digging," said Andrew Bartels, vice president and principal analyst at Forrester Research, during a general session presentation at Everything Channel's XChange Government Integrator conference this month.

Added Ray Bjorklund, senior vice president and chief knowledge officer at researcher FedSources: "Spending for the next several years is going to be very flat. Of course, there's a lot of excitement over stimulus, and that has created a spike in federal spending. That could lull some companies into a false sense of security that they could continue to grow at a strong clip. We had forecast it would be a great challenge for government to get all the funding out on time anyway, and that's proving to be the case."

So analysts aren't upbeat. And solution providers aren't exactly fanning the flames of stimulus excitement, either.

"It's a slow sell," said John O'Brien, director of financial solutions at Agilysys, a Boca Raton, Fla.-based solution provider. "A lot of the money has not yet been released, and the customer has not yet emotionally gotten to the point where they're moving forward. Stimulus isn't yet starting the conversation. But it is expanding the scope of the opportunity. What customers would otherwise defer for a year is now an option. That's what I've been seeing."

"Our challenge is wading through what is it going to take to get the money. The risk/reward factor, as it were," said Jay Kirby, chief sales officer at Troubadour, a Houston-based solution provider. "Is this investment worth the time and money if so much of it is going through traditional vehicles? Companies that feed off the government are in a great position. Minority-owned companies and companies with exemptions and statuses are in a great position. We have government customers, but are we going to be bathed in stimulus? I don't think so."

Mike Humke, vice president of public sector for Hewlett-Packard Co.'s Solution Partners Organization, has spent much of the spring in seminars urging VARs to not "lead with stimulus" so much as understand stimulus as one more dynamic of the public-sector business climate.

Denali Advanced Integration, Redmond, Wash., is keeping its ear to the ground in anticipation of possibly reaping some business spurred by the stimulus funding. Denali does a lot of work in the public sector and for health-care organizations -- two markets likely to see many IT projects funded through ARRA.

But so far Denali has yet to see any immediate opportunities generated by the stimulus package, said John Convery, executive vice president of vendor relations and marketing. He said solution providers are depending a great deal on their vendors to provide guidance on stimulus funding: Denali is a big HP channel partner and HP CEO Mark Hurd recently spoke to Denali customers and prospects, where he was peppered with questions about stimulus funding.

One approach Denali is taking is establishing relationships with companies with products and services most likely to win stimulus funding—think of them as the canaries in the stimulus-funding coal mine.

NEXT: Where The Money Is Where The Money Is

No matter what level of engagement a solution provider brings to ARRA, the opportunities stimulus presents for VARs aren't a mirage. They're real, and many of them are actionable.

Among several of the key numbers are $4.7 billion through the Department of Commerce and Department of Agriculture to fund broadband services, $200 million of which goes to grants for education institutions and local city buildings, $250 million toward sustainable, efficient broadband deployment, and $350 million for the so-called broadband inventory map to maintain that deployment. The most-discussed subdivision of the overall broadband money is the $2.5 billion set aside for broadband loans and loan guarantees, 75 percent of which must, by law, go to rural areas where broadband penetration is lacking.

Health care is another hot button, what with $19.2 billion set aside for incentives related to the adoption of electronic medical records. Through Medicare, physician practices can receive incentive payments up to $44,000 per physician for successful adoption of EMR infrastructure starting in 2011. Hospitals can get up to $16 million each for successful adoption. The flip side -- the urgency -- comes from the fact that physician practices and hospitals that haven't demonstrated EMR adoption by 2016 will see those bonuses turn into penalties.

Government resources for stimulus include www.recovery.gov, which explains ARRA in detail, as well as less complete databases such as www.fedbizopps.gov, www.grants.gov, www.govloans.gov, and the specific state Web sites, all 50 of which provide some feedback and at least cursory information on stimulus.

NEXT: Distributors Take The Wheel Distributors Take The Wheel

With little to go on beyond information repositories, VARs have found it vendors aren't always coming through on ARRA education, though most tier-one and tier-two IT vendors have some level of stimulus outreach in place. (Head to ChannelWeb.com for a complete catalog of vendor stimulus outreach programs.)

Outreach initiatives such as in the partner communities of IBM Corp., HP and Cisco Systems Inc., and business intelligence tools such as Microsoft Corp.'s Stimulus360 and SAP's Business Objects-based stimulus tracking software have been the exceptions, not quite the rules.

However, the opposite is true among distributors.

Tech Data Corp. launched a resource center for VARs that it intends as both a repository of stimulus knowledge and an ARRA community, allowing VARs to interact, view white papers and podcasts, and most of all, talk to each other.

"We're trying to get a handle on a tremendous amount of data—and know what, specifically, is going on inside the Beltway," said Barb Miller, Tech Data's vice president of Government, Technical and Integration Services. "And it's not only a tremendous amount of data, but it's also fluid. It's changing every day. We hope to eventually have all the state information in there as well: the details on which state's getting what, how resellers can get to those dollars, how to leverage existing contract vehicles, and how to help resellers play in areas where they may not have the expertise."

Synnex Corp., meanwhile, has allied itself with research firm Input to host Webinars and specialized stimulus training. D&H Distributing Inc. and Arrow Inc. are both offering Webinars and resources. In addition, D&H is offering financing specials to help VARs close large deals specific to ARRA money without a lot of red tape. Arrow, for example, is offering "step-structure" programs that require lower payments early in a transaction and ramp up as funding for a particular deal becomes available.

ScanSource has invested in training manuals and seminars, and Arrow has a little bit of everything, from its Government Contract Watch Program -- a research aggregation tool through its GovPath community that pulls stimulus data from leading government IT research houses -- and a series of Webinars hosted in conjunction with researcher International Data Corp.

Perhaps the most involved stimulus outreach on the specialty distributor side has come from Westcon Group, whose "New Start America" program -- Web portals, Webinars and searchable databases designed to catalog stimulus opportunities by region and technology sector -- is intended to get beyond the 50,000-foot views of stimulus, according to Vertical Markets Manager Ron Sheps.

Finally, Ingram Micro Inc., while the last of the major distributors to unveil targeted stimulus training, has a two-pronged VAR program called IMStimulus, which includes a business-intelligence-driven, demand-generation resource centered around ARRA and IMGrants. com, a training service for VARs that includes grant writing instruction and grants process education through the database Grants Office. The program will be available to Ingram Micro VARs starting in July.

"There must be 1,000 people in cottage industries tracking stimulus dollars," said Bob Laclede, vice president of business development for Ingram Micro and executive chair for Ingram's sales and services efforts around the stimulus.

"We wanted to go far beyond that and get an action plan together that linked our solution providers with where that money was."

Hurry Up And Wait? No.

It's too early to tell if outreach programs have played a big role in VARs' abilities to win stimulus contracts. Most of the success stories so far have come from solution providers with well-established presences in the public sector—lending credence to the idea that VARs that aren't already deeply enmeshed in verticals like education or health care stand to miss out on at least the first wave of stimulus funds.

In the case of CSI Technology Outfitters, winning a contract funded by the stimulus was due as much to the Easley, S.C.-based solution provider's reputation than any active pursuit of stimulus money. CSI recently won a contract to implement a financial management system for the Edgefield County Senior Citizen Council (ECSCC), a project with a price tag of about $15,000 being funded with ARRA money.

As it happens, one of the decision makers on the ECSCC had previously worked at a school district that was a CSI customer and that person recommended CSI for the ECSCC project, said Sales Vice President Burt Lancaster.

Given that a significant chunk of ARRA funds targets education, that's where CSI had expected to benefit from stimulus spending. "That's really where we've been putting more of our emphasis in looking at the stimulus funds," Lancaster said.

Other solution providers are refusing to play the waiting game. DLT Solutions, for example, established "tiger teams" with its vendors to go after stimulus opportunities, according to CEO and President Rick Marcotte, who has won raves for DLT's Web site addressing the stimulus.

RICK WHITING and JOSEPH F. KOVAR contributed to this story.

NEXT: Q&A With Oracle's Dennis Morgan Q&A: Dennis Morgan

This month's XChange Government Integrator Awards honored Dennis Morgan, vice president of North American Public Sector Alliances and Channels at Oracle Corp., as the Vendor Public Sector Channel Executive of the Year.

We caught up with Morgan shortly before the awards gala to talk stimulus and Oracle's public-sector channel vision.

CRN: You've got your ear to the ground of public-sector IT on a daily basis. What do you hear right this minute?

DM: I hear a lot of things. But there's never been a better time to be in public sector. Historically, in economic downturns in the past, public sector has been the place to be and the place to get things done. Public sector has always been in Oracle's DNA anyway -- it's always been a very focused vertical for us -- and we've made a lot of investments over the years to build a very strong, integrated organization. For stimulus, we didn't have to scramble to develop something or get something in place. We line up pretty well with all the big things coming down the road, including the Obama landscape and making integrating companies and their partner communities a core competency.

CRN: You're referring to Oracle's many acquisitions, including the current discussions with Sun Microsystems.

DM: Yes, although I obviously can't go there until that's done. But we've turned acquisitions into a core competency, I think, and you'll see the same focus and the same high activity behind the scenes to make sure we integrate in a terrific fashion and optimize for the best.

CRN: Take me through, if you would, your assessment of stimulus opportunities for Oracle's partner community and what Oracle has done to help its partners understand ARRA.

DM: I think one think we did early on was we huddled among ourselves and dissected this thing very carefully. We plan on several partner forums in the summertime where we're going to continue to roll out what we're doing and what we can do together. From some folks, there's been too much information. For partners, I think it's a little like going to college: You have to declare a major. You can't do everything in the stimulus package -- you need to find the right fit. If you try to chase it all, rather than focus on what you're best at, you'll lose the focus and then the opportunity itself.

CRN: How do partners keep from losing focus?

DM: Don't lose sight of what you're currently doing in public sector. The whole stimulus and recovery act -- it's a dangerous thing because it'll mean some partners will lose sight of what they're doing and start going off to chase this and that because they've heard there might be an opportunity. The stimulus needs to be a boost: You have to look at the transition to the new administration and see how we as partners can grow our footprint in all areas of public sector. That's how you're going to grow during the flow of stimulus dollars, but more importantly, after. I think the stimulus has the potential to be a terrific intersection for us and all of our partners, whether VARs, systems integrators or ISVs. All of this business intelligence is going to require a lot from everybody. The accountability and transparency component alone -- if you lift the hood on that, that's one big place where Oracle and our partners can get in and really make a difference.

NEXT: CIOs: Don't Be So Sure On Stimulus CIOs: Don't Be So Sure On Stimulus

By Scott Campbell

Money from the American Recovery and Reinvestment Act of 2009 may be starting to trickle out, but it's not showing up in the wallets of municipal IT departments, much to the chagrin of vendors and VARs who have been besieging municipal CIOs for months.

Several municipal CIOs said they're still fielding calls and getting daily e-mails from IT companies looking to get a piece of the stimulus pie. The only problem is, the plate is empty.

Earl Bunting, IT director of the City of Jacksonville, N.C., said he fields almost 10 inquiries a day from vendors and solution providers, all of whom think he has the whole $787 billion in ARRA funds to spend, right now. "They want to tell us how to spend our stimulus," Bunting said.

One problem that vendors and VARs don't recognize is that many communities won't get funding to spend directly on IT projects. More likely, IT spending will be included in another project, such as a water/sewer plant, according to Bunting.

"When you tie some of those in, they become technology projects. We would need a huge data acquisition system for the water-sewer project. That's written in the grant. We'd have to upgrade our fiber infrastructure some, our wireless. We're not going directly after technology money, but after other things that include technology, even public safety. We need more police out there. If we hire more officers, we need more police cars, laptops, software, the things for them to use," he said.

Conrad Cross, CIO of the City of Orlando, Fla., does not expect to see much -- if any -- stimulus money coming his way.

"A fellow CIO sent me a document breaking out funding coming into Orlando. There was money for schools, transportation, roads, and most of those were handled by the state or the school board. There was nothing [for the city's IT department] that trickles down to the municipal level," Cross said. "If I see anything, it would be a true derivative, like a transportation department that needs to improve hardware to keep track of a project. They may have some IT needs."

Like Bunting, Cross also said he's been besieged by vendors and VARs wanting a piece of his stimulus pie. "We've had vendors telling us not only that we're getting it, but how we're going to get it," Cross said. "I tell them we've researched this. We know we're not getting anything."

Both men said vendors and VARs should have more insight into how, and where, ARRA will be dispersed before inundating public sector CIOs with pitches. For example, there's been a lot of buzz around broadband funding available through ARRA, and Cross pointed out that the money is earmarked toward underserved markets. "The City of Orlando is not that," said Cross. "It would be helpful, but my expectations are that we weren't going to get anything from that."

Bunting noted that he doesn't expect to get broadband funding either, though his neighboring county, Jones County, will.

Bunting also sees some flaws in ARRA because it doesn't address long-term issues of maintaining additional infrastructure.

"The problem is, for me and some other CIOs in the state, you have to have a need for it. You don't get grants just to get grants. It will cost you eventually, with long-term maintenance," Bunting said.

Jim Murphy, CIO for the City of Quincy, Ill., doesn't believe his department will see any stimulus funding either.

"We were just with a VAR and he asked what stimulus money [were we] getting. Right now, the answer is nothing," Murphy said. "I know our city received money for repairing roads and bridges. Outside of that, I have not seen a dime going toward technology."

In many cases IT projects are not being funded in ARRA because they don't demonstrate job growth as much as construction or other projects, Murphy said.

VARs should know that many public-sector customers won't be able to spend as much as they'd like, and that may be the case next year too, Murphy said. VARs need to do something extra to win business in this climate, he said.

"The biggest thing VARs should realize is if they want to try to sell something, they have to come in very attractive and do things similar to what HP is doing with zero percent financing, where I'd only have to spend so much a year," he said.