WT Business Beat

By Nick Wakeman

Blog archive
Nick Wakeman

Will you be on the winning side of today's shifting market?

My grandfather used to talk about the tasks on the farm that were separators. You know, the ones that separated the men from the boys.

Making hay in late June, when the sun cooks you and the dust suffocates you, is a separator. So is digging post holes by hand, in ground that is so rocky, the auger can’t get a bite and the post driver is useless.

But you get through it. You drink plenty of water; you wear gloves; you take a break. But mostly you suck it up, because no matter how tough, the job has got to get done.

When I look at the market for government contractors today, I’m reminded of my grandfather’s separator philosophy.

It’s a tough market. The best estimates are that 2013 and 2014 will be low points, but that the market should start to turn upward in 2015. That’s with or without sequestration.

If you throw 2010, 2011 and 2012 into the mix, we are in the middle of a multi-year stretch of slow to no growth. Couple that with crushing budget deficits, a shaky world economy, persistent terrorist threats and a political system that seems to be locked in a death grip of partisanship, and it’s enough to make you want to pack it in and head back to the farm.

But as I talk with executives and watch the happenings around the market, I don’t see them walking away. I see plenty of dedication and hard work going on.

After all, this is a great time to be in the government technology market, with the rise of such groundbreaking and innovative technologies such as mobile computing, the cloud and data analytics, to name a few.

And it still is a huge market, even if you believe the darkest predictions.

But despite good intentions and trying hard, I think the market conditions are such that we are going to see some companies come through this period stronger, and others that will come through weaker.

I would be worried if I were a small to midsize publicly traded company. The margin pressures coupled with Wall Street expectations will only make life harder for these companies. To succeed, these companies will either become aggressive acquirers – see KEYW Corp.’s activity – or they will be acquired themselves.

The shift to everything as a service is bound to have negative fallout on some companies, as government buyers look for quicker and hopefully less expensive ways to field technology. The winners here will be companies that understand the mission, master the technology and can offer quick, flexible solutions.

Because of the budget and economy, many companies have embarked on streamlining. Layoffs and reductions are hardly newsworthy anymore. Part of the reason Science Applications International Corp. is splitting into two comapnies is to cut costs.

The question for SAIC, and any for other company that is streamlining operations, is: Are the right things being cut? Are the investments for growth still being made? Time will tell.

Again, the public companies have the biggest challenge here because of the three-month timeframe they have to operate in. The return has to be now, not two years from now.

One question I have is whether mega-mergers will be part of the mix. It remains to be seen if the combination of BAE Systems and EADS will go through as envisioned. If successful, that transaction could set the stage for more deals.

At the very least, the deal making will continue in the small and mid-tier levels of the market.

It is hard to tell what the market will look like coming out of this period. Five years from now, the market will look different. Familiar names will be gone, but like granddaddy said, there is always work to be done.

Posted by Nick Wakeman on Sep 24, 2012 at 7:23 PM


Reader Comments

Tue, Sep 25, 2012 NC

Roger that, Nick. Thanks.

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above

What is your e-mail address?

My e-mail address is:

Do you have a password?

Forgot your password? Click here
close
SEARCH
contracts DB

Trending

  • Dive into our Contract Award database

    In an exclusive for WT Insider members, we are collecting all of the contract awards we cover into a database that you can sort by contractor, agency, value and other parameters. You can also download it into a spreadsheet. Read More

  • Is SBA MIA on contractor fraud? Nick Wakeman

    Editor Nick Wakeman explores the puzzle of why SBA has been so silent on the latest contractor fraud scandal when it has been so quick to act in other cases. Read More

Webcasts

  • How Do You Support the Project Lifecycle?

    How do best-in-class project-based companies create and actively mature successful organizations? They find the right mix of people, processes and tools that enable them to effectively manage the project lifecycle. REGISTER for this webinar to hear how properly managing the cycle of capture, bid, accounting, execution, IPM and analysis will allow you to better manage your programs to stay on scope, schedule and budget. Learn More!

  • Sequestration, LPTA and the Top 100

    Join Washington Technology’s Editor-in-Chief Nick Wakeman as he analyzes the annual Top 100 list and reveals critical insights into how market trends have impacted its composition. You'll learn what movements of individual companies means and how the market overall is being impacted by the current budget environment, how the Top 100 rankings reflect the major trends in the market today and how the biggest companies in the market are adapting to today’s competitive environment. Learn More!