State & local special report: Magnetic attraction
Federal players look for bigger S&L play
"I'm just hoping that our head start will get us out and keep us out in front." ? Hugh Taylor, Northrop Grumman
Large contracts for information technology outsourcing and human services with state and local governments may draw federal systems integrators into the market and cause some already in it to refocus their efforts.
Some analysts and industry observers believe the market is getting more competitive as traditional players compete for large-scale projects and federal integrators with a toehold in the market rethink their existing strategies.
Two factors driving this interest are the declining growth rate of federal IT spending and the opportunity to win large-scale outsourcing projects that can generate hundreds of millions of dollars over the life of the contract.
"Clearly, the competitive landscape of state and local government has gotten much more intense," said Rishi Sood, research vice president with the market research and consulting firm Gartner Inc., based in Stamford, Conn.
For example, among its recent wins, Northrop Grumman Corp. counts a seven-year contract worth more than $660 million with San Diego County to manage the county's IT and telecommunications services and a 10-year, $1.9 billion contract from Virginia's government to modernize and support the state's aging technology infrastructure.
"Given the sheer numbers that we were able to pull off in the last year, I would think a lot of people are looking [at the state and local market] ? especially if the opportunities are not there in the traditional spaces," said Hugh Taylor, president of Northrop Grumman's commercial, state and local group.
"I'm just hoping that our head start will get us out and keep us out in front," Taylor added.
Because of Northrop Grumman's success ? the company has more than $500 million in annual state and local business ? and a slowdown in some federal initiatives, integrators such as Computer Sciences Corp. and Science Applications International Corp. are exploring ways to overhaul their state and local practices, Sood said. Both companies have a toehold in the state and local market and rank in the bottom of the Who's Who list.
These companies are trying to understand how they can use their federal strengths to win state and local business in segments such as public safety, criminal justice and transportation as well as IT outsourcing, Sood said. They are trying "to build a focused approach to state and local instead of the ad hoc approach they have had in the past," he added.
The key for companies that want to enter the market or expand their footprint is to win opportunities that the traditional players either aren't chasing or don't do well, said Ray Bjorklund, senior vice president and chief knowledge officer at the McLean, Va., market research firm Federal Sources Inc.
Any federally focused integrator seeking to enter the market should consider crafting homeland security services, he said.
"As federal initiatives like SBInet take off, there could be increasing state and local demand to use military-like surveillance technologies to build law enforcement systems that integrate with the federal level," Bjorklund said.