Federal market favors incumbents

The siren call of the booming federal information technology market, estimated to reach almost $53 billion in fiscal 2003, should be ignored by companies that do not already sell in that space or do not have established partners that sell there. It's probably too late to jump in now, said Jim Kane, president and chief executive officer of Federal Sources Inc., at the market research firm's 17th annual federal outlook conference. "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. 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, the 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. Existing merger and acquisition trends will continue, Kane said, 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.