GSA Gold Rush Redefines Roles for Integrators, Product Vendors

The General Services Administration's recent moves to reform its multiple-award schedule program has triggered a gold rush in the information technology community. Relationships between integrators and their product supplier subcontractors are likely to be redefined, as both camps seek the expected motherlode of booming schedule sales.

GSA launched its reform effort last year, raising the maximum order limitation (MOL) on the microcomputer-oriented Schedule B/C. As of April 1, the MOL was abolished entirely on Schedule B/C and the large-systems Schedule A. In addition, GSA is allowing vendors to add systems integration services to the B/C contracts. These changes have caused the schedule program to emerge as a vehicle for larger, more complex solutions.

Federal buyers have responded to the changes. Sales on Schedule B/C contracts rose 40 percent from 1994 to 1995, according to Steve LeCompte, vice president of IDC Government Market Services (IDC GMS).

Schedule reform and the attendant sales boom are forcing integrators and their partners to rethink how they do business, industry executives reported. With the ability to conduct large buys, the schedule is taking on the popular indefinite-delivery, indefinite-quantity (IDIQ) contracts that many integrators hold.

With the rise of the schedule, "the need for multiyear IDIQ contracts will probably wane and, therefore, the need for integrator-type contracts," said Jon Futrell, who handles federal sales for Symantec Corp.'s Delrina Group. Delrina Group currently does business through the GSA schedule and such integration deals as the Army's Sustaining Base Information Services pact.

Recent agency procurement actions indicate that the shift is already under way. The Treasury Department and the Federal Aviation Administration earlier this year announced that they would forgo recompetitions of large IDIQ vehicles, opting to make purchases through the GSA schedule and other established vehicles.

The procurement changes give agencies the freedom to choose whatever acquisition process is most efficient for them - whether through an integrator or some other source.

"The government is becoming the integrator," said Mike Mooney, vice president of business development at PRC Inc.

"It can look across all the GSA schedules like multiple IDIQs. With the MOL lifted, the GSA can invite systems integrators to play, but the government can order parts from anyone without the integrators," he said.

"Dell [Computer Inc.] and Gateway [2000 Corp.] are at the top of the list [of schedule vendors], and they don't have to work through anybody," added Bob Dornan, senior vice president of Federal Sources Inc., McLean, Va. "They take what slim profits there are, and they don't have to share them."

EC, BPAs Intensify Competition

The expansion of the schedule program into electronic commerce (EC) could further intensify competition between integrators and product providers, industry observers said. As the GSA process becomes more electronic, the growth of electronic data interchange (EDI) will pit manufacturers against resellers and integrators, LeCompte said. Tougher competition could shake out winners and losers more vigorously when GSA Advantage, the EC program for the GSA schedule, takes hold, LeCompte said.

With EDI, the government will be able to bypass resellers and integrators and go directly to manufacturers. At the very least, EDI will tempt manufacturers to play directly more often, potentially diminishing the usefulness of resellers and integrators.

PC vendors expect EDI to quicken the pace and grow the volume of business. "Revenues on schedules have already risen significantly. It'll improve more with electronic commerce," said Gary Newgaard, director of federal sales at Compaq Computer Corp., Reston, Va.

Blanket purchase agreements (BPAs), which allow agencies to negotiate their own volume purchasing arrangements with vendors on the GSA schedule, could also encourage PC and PC-related vendors to deal directly with agencies.

In April, Dell issued a public endorsement for BPAs. In his keynote at FOSE, Michael Dell, Dell's chairman and chief executive, lauded the reduced complexity of federal purchasing facilitated by BPAs.

Companies such as Dell and Zenith Data Systems are among those likely to take advantage of BPAs, observers said. Zenith, a GSA schedule holder, already sells about 90 percent directly to the federal government and only 10 percent through integrators, said Pat Gallagher, Zenith's vice president of sales.

The Integrators' Role

Industry executives, however, see a continuing need for specialized resellers and integrators in a world of commercial off-the-shelf products.

At Microsoft Corp., for example, the company's federal business model relies on resellers.

"We're going to have 12 holders," said Jeff Moore, channel manager of Microsoft's Federal Division, Washington, D.C. Government Technology Services Inc. and ASAP Software Express were the first among the dozen vendors to have their schedule contracts awarded.

Microsoft is not likely to become a GSA schedule holder. Instead, the company is trying to keep up with the rise in Windows NT sales. The company's Windows NT Server business has grown more than 250 percent in the past year, and NT Workstation sales numbers are also high, Moore said.

And Delrina Group's Futrell emphasized the need for resellers that understand both the company's forms automation applications and a customer's networking environment.

Integrators will also continue to play a leading role in the workstation environment, according to Jan Morgan, a research analyst at IDC GMS. "Workstations are not plug-and-play equipment like desktops," she said. "They require a good deal more integration." Despite schedule reform, IDIQ contracts remained the dominant vehicle for workstations in fiscal 1995, according to Morgan. She predicted that that trend would hold for 1996.

Some product suppliers said they aim to maintain a mix of schedule and integrator business. John Gugliotta, director of business operations for Sybase Inc.'s public-sector unit, said the company believes in having a "robust" schedule, but "we also see relations with prime contractors being very critical to our success." Sybase participates in Schedule A and works with such integrators as Electronic Data Systems Corp. and Logicon Inc.

But Gugliotta added that Sybase is being "very selective" as to which integrator contracts it will pursue.

Other observers contend that the move toward more schedule purchases will eventually spark demand for integrators as agencies grapple with tying systems together on their own.

Without a single point of external accountability, integrators fear there could be chaos for the next few years as the GSA schedules come alive.

"If you introduce all these schedules, and government agencies pick and choose from different schedules, how will it come together in a way that satisfies the government user?" PRC's Mooney asked. "Do the people defining these new schedules understand the subtle challenges of implementing systems?"

Agencies may not need integrators to do their buying for them, but integrators may end up dealing with the results of agencies' buying decisions. Dornan noted that agencies are looking to downsize information technology staffs. "[Agencies] will have to rely on contractors to provide the glue," he said.

Indeed, an integrator's value lies in its ability to function as the central point of accountability for the whole system, the sum of its parts, integrators maintained. "There's more concern for value now instead of just price," said Paul Rector, EDS' GSA program manager.

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Gerber is a free-lance writer based in Kingston, N.Y.