Expert advises: Booming fed IT market favors established players

The federal information technology market seems enticing from the outside, with IT spending estimated to reach almost $52 billion in fiscal 2003. But if your company is not already selling in that space or does not have established partners who sell there, it's probably too late to jump in now.


That was one conclusion offered by Jim Kane, president and chief executive officer of Federal Sources Inc., at the market research firm's 17th annual federal outlook conference May 8.


"Sales in this market are now one of continual engagement," Kane said. Industry professionals constantly interact with their federal customers at conferences and meetings, through associations and social events, he said. This creates an intimate knowledge of the agencies and their projects and the imperatives and priorities set by Congress and the Bush administration.


The government may be on a wartime budget, with increased spending and projected deficits, but priorities have not shifted significantly. "There are new dollars, but not new opportunities," Kane said.


For example, many of the biggest procurements coming up are recompetes of expiring contracts, he said, such as the Justice Department's $2.5 billion STARS III program, Transportation Department's $1.3 billion BITS II, and the Energy Department's Albuquerque Sandia Labs Support II.


E-gov initiatives, increased emphasis on information security, transformation of the Defense Department and outsourcing were all key elements of the Bush administration's approach to governance, Kane said.


The same rule applies to Defense Department projects, Kane said, pointing to examples such as the Army's STAMIS Computer Contract III, worth an estimated $700 million, and the Air Force's $200 million GPS III contract.


Existing merger and acquisition trends will continue, he predicted, and many of the giants of the defense industry ? Lockheed Martin Corp., Northrop Grumman Corp., Boeing Co. and Computer Sciences Corp., among others ? will keep pushing into the broader federal IT market.