Robert Davis

OPINION

2014 forces demand action, not waiting

Many companies are relieved that 2013 is over. What a year! It was a challenging time for most companies.

Have we turned the corner towards some sense of normalcy or is the pendulum continuing to swing wide of its usual arc?

Unfortunately, the pendulum is still swinging wide, quite wide. This year will be even more challenging for many firms. Market forces were released in recent years with the advent of sequestration and more that are still running their course.

Success will be harder to achieve this year than 2013 because:

  • Budget pressure will continue of course and as a result programs will be continually reviewed for cost savings; some programs, large and small, will be ended or consolidated.
  • The effects of sequestration will continue as part of the ongoing budget pressure.
  • Government agencies do not have adequate procurement staffing and resources - this will continue to slow down the number of procurement actions and awards.
  • Related to the above point, the government will increase their use of IDIQ contract vehicles because it allows them to avoid FOC RFP procurements, which saves them time and effort even if it might cost the government more money later - bidding TOs across IDIQ multiple vehicles will create increased competition and increase B&P costs.
  • Related to the above point, the government will increasingly turn to small business (SB) procurement actions to avoid releasing FOC RFPs - while SBs are now everyone’s new best friend, they will demand, rightfully so, very tightly written teaming agreements.
  • The government will seek significant ‘business expertise’ for their operational domains to help them become more productive within their existing infrastructure - the government will avoid adding more technology to address a business need.
  • A bear market that began in our industry in 2010 will continue for the foreseeable future - few firms have come to grips with what this mean at a practical level.
  • IT services margins will continue to decline because of (1) the effects of LPTA, real or perceived, and (2) the ongoing commodification of IT services.

The combined effects of these market forces have created a negative glide path for many firms. This pressure has driven some firms to constantly trim costs.

But how does a company change their current trajectory? What might provide a better way forward?

There are game changers:

  • A complementary acquisition that creates ture competitive advantage.
  • Real innovation from an internal R&D investment.
  • Capitalization of existing intellectual property.
  • Productization of a unique customer application.
  • Strategic development of key subject matter experts
  • Creation of a high-performance web site.
  • Or a focused strategic alliance with a specific partner.

There are some options and there are others, but waiting is not one of them. 

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