Bush agenda drives sales

Homeland security may have taken the spotlight off enterprise architecture plans and e-government initiatives, but those factors still influenced information technology spending during the past year.

Such initiatives are driving a demand for storage systems, networking technologies and related services, which accounted for a huge portion of General Services Administration schedule sales in fiscal 2002, according to industry experts. And sales activity related to security, continuity of operations and mobile devices should remain strong into fiscal 2003 as well.

The list of GSA Schedule 70 vendors for fiscal 2002 shows the usual suspects Dell Computer Corp. and IBM Corp. at the top. Dell continues its reign at No. 1, with Schedule 70 sales of $1.3 billion in fiscal 2002.

But then come new names. Northrop Grumman IT, bolstered by acquisitions of vendors such as Federal Data Corp. and Logicon Inc., ranked third in 2002 with $406.1 million in sales of software, and EMC Corp., absent from the 2001 top 50 list, landed in 21st place in 2002 with $103.8 million worth of storage-area networks and storage management software sales.

Fiscal 2002 finished a bit differently from other years. There was no dramatic surge in spending in the fourth quarter's final weeks as some experts had predicted. In fact, many vendors saw a slight decline in fourth-quarter sales.

The top 20 Schedule 70 vendors reported $5.3 billion in schedule business in 2002, a 23 percent increase from 2001's $4.3 billion.

Across the board, a combination of executive mandates and simple experience is making government agencies more savvy about getting the most for their money, according to John Lauder, vice president of business assurance at ACS Government Services Inc., which did $102.6 million in Schedule 70 sales in fiscal 2002.

"Clients are becoming more astute in using GSA" contracts, said Joseph Logue, vice president of Booz Allen Hamilton, which logged $172.2 million in fiscal 2002 Schedule 70 sales.

That increasing sophistication prevented a last-minute surge of business at the end of the fourth quarter, he said. "It was more deliberate than usual. Usually you get the [last-minute] call on Sept. 28 and try to figure out what to do. Now that call comes on Sept. 1."

This year, the looming question is when agencies will have money to spend at all. Funding for many civilian agencies is still locked up on Capitol Hill in unpassed appropriations bills.

"2003 is going to be a little bit of an odd year," said Payton Smith, manager of public-sector market analysis services at research firm Input. "There's not a lot of time left for things to happen" in fiscal 2003.

However, vendors can focus on other projects while impasses are being resolved, said Bob Barr, director of government marketing at Dell. "The [Defense Department] has a budget and is spending aggressively. The civilian agencies, under the continuing resolutions, can spend some money," he said. "There will come a time soon when those budgets will pass."

Agencies are still working to create systematic approaches to IT through the use of enterprise architecture plans.

OMB requires agency leaders to consider how each of their IT investments addresses a business need and how systems interact with one another.

"That affects not just the agencies, it indirectly affects the folks who want to sell those things to the government," said Ray Bjorklund, vice president of consulting services at Federal Sources Inc.

Many agencies are consolidating and upgrading databases as part of an effort to streamline their IT operations. The convergence of that trend with an emphasis on e-government and disaster recovery offers a boost to storage vendors, whose products are critical in those endeavors.

"We were able to capture 170-plus new customers in 2002" in the federal government, said Steve Alfieris, vice president and general manager of EMC's federal systems division. "Storage is a critical component of infrastructure, and there's a lot more attention being focused on enterprise infrastructure."

Wireless Wins

A growing demand for wireless technology is expected to spark another major trend this year. The drivers for the trend come from several different directions, observers say. In DOD, it's the need to support first responders and develop a more mobile military. "They want to get information into the hands of critical people in real time," said Jim Shanks, president of reseller CDW Government Inc. "And in some agencies, they just want to let their workers be more mobile."

Agencies are more willing to consider mobile options than they once were because the technology has become more reliable and secure, said Scott Rover, business development manager for GTSI Corp.'s mobile and wireless solutions team.

For example, Internal Revenue Service managers are getting new laptop computers as part of the agency's ongoing effort to upgrade its end-user machines, said IRS spokesman Tim Harms. In December, the agency signed a three-year deal worth up to $100 million with Hewlett-Packard Co. for Compaq Evo desktops and laptops. Managers can take the laptops into the field and dial into the office via a secure connection, he said.

Business Continuity

Investments in business continuity plans, which ensure that an agency can continue functioning even if its primary IT facilities are damaged or destroyed, are also gaining momentum. Such efforts rely on storage and database management products, among other technologies. Although sales have been uneven, the next two or three years may see a significant increase, analysts say.

Some agencies have undertaken extensive projects in this area, including one civilian agency that hired GTSI to design and test an alternate computing facility that features $15 million worth of equipment. But many agencies have put business continuity aside to focus on other priorities, said Jocelyn Young, program manager for government research at IDC.

"The agencies are more in an assessment phase in terms of their disaster recovery," she said. "It has to start moving toward execution in this fiscal year."