What's Hot In The Public Sector?

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[April 28, 2008]

What's Hot In The Public Sector?

(VarBusiness Via Acquire Media NewsEdge) Green is good. So is gray. Not to mention the latest alphabet-soup sounding buzz phrases of the IT culture-SOA, SaaS, IPv6-that are expected to drive government IT contract sales in 2008.

At least that's the picture VARs and analysts present in forecasting hot spots for this year. "Green" translates to the pressing need for more environmentally friendly technology for agency customers. "Gray" relates to the aging of the government workforce, resulting in an expected demand for more outsourced jobs, not to mention overhauled IT systems that require minimal people power. And these are just two growth drivers that VARs are watching closely these days. Others reflect shifts in the technology needs of today's government customer, especially when it comes to consolidation, virtualization and information-sharing. In recent conversations, VARs say the time is now to bring tech solutions to government customers addressing these needs.

"Virtualization is shifting from awareness to application right now," said Andy Lausch, senior director of federal sales for CDW Government Inc., a wholly owned subsidiary of CDW Corp., a Vernon Hills, Ill.-based solution provider. "When it comes to server consolidation and streamlined IT management, we're maximizing virtualization to help agencies realize the greatest return on investment. Also: Technology solutions that allow for realtime information management and collaboration across departments and agencies are increasingly in demand. We're seeing considerable interest in unified communications solutions that integrate phone, e-mail, instant messaging, business applications, videoconferencing and other collaboration tools."

Striking at these niche hot spots is critical for VARs because, overall, the federal government IT sales pie is growing, but not at a particularly spectacular pace. Which means the hunt is on to establish a presence within the individual pie slices that offer the most growth potential: Federal spending overall is forecast to increase from just less than $97.3 billion in fiscal year 2007 to more than $100.6 billion in fiscal year 2008-an increase of about 3.4 percent, according to the U.S. Office of Management and Budget. Contracted IT spending in the federal market will increase at about the same rate, from $65.2 billion in 2007 to $67.5 billion in 2008, according to Input, a Reston, Va.-based industry market-research firm.

The state/local forecast, however, is much stronger: IT spending at the state government level will grow to $32.7 billion in 2008 from $29.6 billion in 2007 (10.5 percent growth), Input forecasts, and local government IT spending will increase to $27.9 billion from $25.2 billion (10.7 percent growth) within the same period.

Input has also broken out the top federal contract award opportunities for 2008 and immediately beyond. As is always the case, Department of Defense jobs dominate the list, with the top contract being the Army's Rapid Response Third Generation (R23G) program, expected to be awarded in May with a $41 billion estimated value. Also highly coveted are the Army's Program Executive Office for Simulation, Training and Instrumentation (PEO STRI STOC II) contract ($12.5 billion) and the Navy's pending Next Generation Enterprise Network (NGEN) award ($9.2 billion).

Other recent market findings have also emerged:

- Outsourcing prospects are ripening. At least that's the picture being conveyed by CDW. The company recently released a survey indicating that only 16 percent of overall government agencies will hire additional IT staff in the next six months, a 5 percentage point drop since December 2007. And 51 percent of federal agency IT decision makers are cautiously optimistic that their budgets will grow over the next six months-up 8 percent from December 2007.

- Mobility is in demand as well. In fact, the amount of money that the federal government spends on notebook computers will now start to exceed that of desktop machines, according to Government Insights, a Framingham, Mass.-based, IDC-owned market-research firm. In 2007, federal agencies spent $651.5 million on notebooks/laptops compared with $767.1 million on PCs. In 2008, however, federal spending on notebooks/laptops will soar to $725.7 million, well over the projected $557.3 million on desktop PCs, Government Insights predicts. Other top hot spots for IT investment throughout federal, state and local government agencies, according to Government Insights: development of Web 2.0 to enhance citizen interaction and business transactions; optimization; infrastructure, software, data centers and other tools as a service; enterprise resource planning; security and green technologies.

In interviews with VARs who work extensively in the government space, both those topics and some additional ones emerge as key for those looking to boost sales through federal, state and local government customers:

- Consolidation/virtualization. Government customers continue to seek ways for IT solutions to enable agencies to do more with less, and consolidation will continue to be a driving force toward this goal. Just recently, GTSI, the high-profile Chantilly, Va.-based government solution provider, completed the assessment, integration and installation for a U.S. Department of Homeland Security consolidation project, in which 100 servers were consolidated into three blade chassis. "Agencies need to consolidate multiple sites," said Mohamed Elrefai, vice president of the enterprise solutions group with GTSI. "It's not a simple matter of server/storage applications. It involves multiple applications over a network, as well as server upgrades and improved cooling systems for the consolidated data center operations. These projects allow the government customer to reduce costs greatly, by not needing to run multiple data centers for multiple geographic regions. Also, they can now accelerate new applications more readily, pushing them out from a central site in a more efficient manner."

Cisco Systems Inc., VMware Inc., Network Appliance, EMC Corp., IBM Corp. and Hewlett-Packard Co. are all coming on strong in the consolidation/virtualization space, looking for solution providers to partner with. "Storage demand growth is dramatic because companies are using network and unified storage to augment server virtualization," said Eric Martinis, managing director, federal, at Presidio Networked Solutions, a Greenbelt, Md.-based solution provider.

- IPv6, a.k.a. Internet Protocol v6. Much reported as the "next-generation" Internet, the Office of Management and Budget has set a June 2008 deadline for agencies to be compatible with this technology, which will widely open the URL address space. And its encryption and authentication components are expected to greatly improve security. But federal, state and local agencies are still in the planning stages when it comes to bringing their existing systems into this new world, said Dan Jacobs, CEO of Florida Micro, a Boca Raton, Fla., solution provider. "This means a lot of opportunity to provide both guidance and hardware platforms that will ensure a smooth transition," he said. "There will be much need for infrastructure, telecommunications and other tools. In the age of terrorism and counterterrorism, this move has been clearly identified as a prescription for threat reduction and prevention in agencies that operate missiles, nuclear systems and even conventional weapons systems."

- Business intelligence. As more agencies seek to allow taxpayers to apply for driver's licenses, get building permits and perform other tasks online that traditionally have been on paper, solution providers are in demand to provide business intelligence tools to simplify the information-gathering, analysis and exchange process. In the case of Bitam, a Roswell, Ga.-based solution provider, a local government customer with 350,000 citizens needed to replace a paper-based Excel spreadsheet system to meet with new public reporting and compliance laws. The upgrade has vastly enhanced service to those many citizens. "The old system required no less than five full-time employees to maintain," said David Abdo, CEO. "It was very slow and arduous. It wasn't feasible to do a broad-based modernization of the hardware and software. So we provided a performance-management system that allowed for speedy data generation and analysis. We were able to send dashboard alerts to officials to spot trends and take responsive action. It allowed the customer to work six times faster in getting information to citizens."

- Service-oriented architecture. Agency customers are warming up to modernization plans after seeing success in the private sector. But there's so much valuable data on legacy systems now that they're concerned when it comes to a "rip-and-replace" approach, which is why SOA is so valuable. SOA packages various tech applications as services that can work with existing system components without any disruption in the business flow of government. Said Charles Krahling, vice president of channels for Micro Focus Ltd., a U.K.-based solution provider that services many U.S.-based government customers: "The lack of success with approaches to rewrite or to entirely rip and replace COBOL systems is partly to blame for customer concern. But with SOA, they can continue using the systems that work best for them, extending their lifetime while integrating with new applications and programs, like Web enablement."

- Digital video solutions. With collaboration and information sharing being a prime goal, agencies are finding that digital video is in demand, especially with respect to distribution of the digital video data across networks via the Internet. The overall market for video surveillance software alone will grow from $139.76 million in 2006 to reach $826.65 million in 2013, according to market-research firm Frost and Sullivan. System Development Integration (SD-I), a Chicago-based solution provider, recently helped an airport client migrate to a digital video system. "Instead of the video being shackled by cables to a security office, it's available across the entire internal network," said Mark Moscinski, project manager for SD-I. "Now these same video feeds are being used and shared by multiple local, state and federal agencies. There's a level of communication and collaboration between these entities that was never possible in the analog days."

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SIDEBAR: How To Make Green On 'Green' Initiatives

Government customers say they're going green. And solution providers are looking to translate this into a winning sales opportunity.

Among the initiatives: Recent mandates have required lead-free computer products to protect the environment and end users from harmful emissions. And the federal Environmental Protection Agency is stepping up efforts to get more Energy Star-compliant products into agency cubicles. Server-consolidation projects are also picking up steam, thanks to what's dubbed as a "Green the Hill" initiative.

As a result of such projects, solution provider Accelera Solutions, Falls Church, Va., is seeing 10 percent growth in the federal sector. "Also, telework is being used extensively now at the Securities and Exchange Commission and the State Department," said Joe Brown, president of Accelera.

In fact, Dan Jacobs, CEO of Florida Micro, a Boca Raton, Fla.-based solution provider, said he hasn't seen this kind of unified movement for change since the dawn of the new millennium. "It's clear agencies are now required to procure environmentally friendly products that conserve energy," he said. "This will be like it was in the years leading to Y2K, where all new systems were required by many agencies that were not up to date."

Shawn McCarthy, director of research at Government Insights, Framingham, Mass., however, provides a cautionary note. "Most agencies will still do a detailed ROI analysis before committing to broad adoption of green IT," he said. "If the payoff for buying green appears to take too long, or if the return on investment can never be gained, then you won't see much more than a slow transition to more energy-efficient PCs and servers, only as new servers are needed. But whenever a positive ROI can be calculated, the change will be more substantial, all the way up to the data center level." -Dennis McCafferty

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SIDEBAR: VARs Step Up To The 'Brain Drain' Challenge

Government offices are getting grayer. As a result, VARs in the federal/state/local agency channel are positioning themselves to take best advantage of what is being anticipated as an outsourcing boom.

Sometime this year, about 45 percent of the federal government's IT workers will be 50 years old or older, according to research firm Input, Reston, Va. There will be a manpower shortage, and a "brain drain," as people with valuable knowledge pack up for those retirement homes in Florida. Which is where VARs will step in.

"If an aspect of work isn't at the core of the agency's business, it will go out to systems integrators or other third parties," said Brad Nacke, government business manager for Emerson Network Power, a Columbus, Ohio-based solution provider. "There will be a lack of people available to do the hands-on work, like hooking up power and cooling a facility to support IT."

In addition, the younger generation of government workers will likely telecommute more-or otherwise have IT needs in the field, instead of in an office-increasing demand for mobile/wireless solutions.

It's not as if this demographic shift has not been anticipated for years now. Agencies have already been preparing to streamline systems operations.

"We're seeing a huge demand for solutions that eliminate the need for multiple layers of personnel to run complex IT systems," said Eric Martinis, managing director, federal, at Presidio Networked Solutions, a Greenbelt, Md.-based solution provider.

"One example is the data center that can be managed from anywhere in the world ... I think that the future is in solutions that once were managed by five people, but can now be managed by one or two people."

That said, Shawn McCarthy, director of research at Government Insights, a Framingham, Mass., research firm, said VARs shouldn't expect a sudden, "Chicken Little" like response from agencies. "You won't see wholesale departures by government employees all at once," he said. "Not everyone who is eligible to retire will suddenly walk out the door." -Dennis McCafferty

http://www.governmentvar.com

Copyright 2008 United Business Media US, LLC. All rights reserved.

Copyright ? 2008 CMP Media LLC

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