13 trends and predictions driving today's market

This blog is adapted from a talk I gave this morning at a RightNow Technologies partnering event.

They asked me to kick off the morning with an overview of the market and the trends with some special emphasis on transparency and cloud computing.

One of the problems -- or fears -- I have with this type of thing is that I’ll just repeat things that everyone has heard.

Although I got some good feedback after my talk, I know no one is going to say to my face that I flopped. So I thought I’d throw out my major points here and see what people thought.

The Top 100

The companies on Washington Technology's annual Top 100 rankings are important because of the dominant positions they hold in the market. Of the $550 billion the government contracts out each year, these 100 captured $129.9 billion in fiscal 2009. The top 20 captured $91.5 billion.

We follow them closely because what these companies do reflect the major trends in the market, particularly where the market is growing and where contracting opportunities are developing.

National security

This will continue to be the dominant priority for the federal government. We are fighting two wars. We still have the global war on terrorism. Cyberattacks remain a major threat.
An issue that hasn’t gotten much attention yet, but will in the future, is energy. Not just green IT, but after Congress and the president agree on an energy reform bill, we’ll see systems integrators and other government contractors making investments to meet the requirements of that bill. Right now, they are waiting because with a reform bill there is now too much risk to invest.

Procurement

There is good and bad news with procurement. The bad news is that it is a mess. There are too few acquisition officers managing too many contracts. The result is delays, mistakes and an increase in oversight.

The good news is that procurement is being talked about by the president. It is a front burner issue as the government tries to get control of its spending.

Budget and deficit

This is the elephant in the room. It is a very serious situation. The government only takes in enough revenue to pay for Social Security, Medicare and Medicaid. Everything else is done on borrowed money.

The effect is that even high priority areas such as national security will see increased scrutiny of their spending, if not outright cuts. There will be more demand for a return on investment, and forget about large new projects. The projects we will see will be smaller and will need to deliver results quickly. If not, they are gone.

BRIGHT SPOTS

Transparency and open government

Right now, transparency isn’t working well. But it's a positive trend. The more information that is publicly available, the better off we are.

What we need are better tools to make sense of the data dump. One possible approach is to use social media tools. The ability to share, comment, aggregate and collect information can be powerful.

One simple idea is to add a Like button to government documents. Or have the ability to see what your friends or contacts think about a government report or other data.

Without tools, without ways to bring context and meaning to the data, transparency is just a bunch of noise.

Cloud computing

There is still a lot of hype about cloud computing, but there is a sense of inevitability. It is not when, but if, to borrow a phrase. In five years we’ll see a wide-range of applications of cloud computing, from private clouds, to public, to hybrids.

Another aspect of cloud computing that is interesting is that it can level the playing field. A small or midsized company with the right partners can more realistically take on a large company. And large companies that have significant business building and managing infrastructure for agencies will see that cash-rich business erode. They will have to adjust.

Of course, many of the large companies are developing cloud computing lines of business, so the adjusting has already begun.

Strategic moves

Driven by these trends, we are seeing companies do the following:

• Restructure their businesses to be more efficient and to align their business with government priorities.

• Make more mergers and acquisitions to move into the priority markets or to replace lost revenue.

• Perform more marketing efforts focused on how contractors can help agencies save money and operate more efficiently.

My predictions for the market are:

• Slower organic growth.

• Fewer big, new opportunities.

• More competition as more companies chase fewer opportunities.

• Pressure on profitability.

That’s a quick nutshell of my 30-minute talk. Am I on the right track? What am I missing?