Navy's server freeze no harbinger of rough seas for contractors

The Navy’s decision last week to reduce its IT infrastructure by freezing the purchase of servers and not building new data centers won’t have an immediate – or long term ­– negative effect on the federal contracting community, industry experts say.

In fact, the responses from those polled were more akin to a mild ripple than a monster wave.

“Like everything else, all changes in policy take a while to take effect, at least to ripple their way through the system,” said Alan Bechara, president and CEO of PC Mall Gov, a provider of IT solutions, services and consulting to federal, state and local governments.

Because the federal government is one of PC Mall’s primary customers, Bechara said he is never happy to see reduced federal spending. “But I think it’s too soon to really assess what this means,” he added.

“I’m never enthusiastic about customers stopping any portion of their business. On the other hand, we don’t do huge numbers in the Navy,” he said. “But if they’re not upgrading data centers, maybe they’ll spend money on advancing other technologies. I mean, they’ve got laptops, they’ve got desktops. They’ve got a whole bunch of other things. They’re not going to stop spending money, do you think?”

Ray Bjorklund, senior vice president and chief knowledge officer at FedSources, a government market intelligence firm, said he doubted such a policy could be effective throughout the service because there are always people who will want to add servers as a way to increase throughput of data and communications capability.

“Certainly suppliers are going to get a little less revenue because of the fewer purchases. But in some ways I think it’s a supplier responsibility to advise their customers of the ramifications of the policy.” Bjorklund said. “If a client picks a [value-added reseller] and says ‘I want to buy a server,’ I think it’s incumbent upon that VAR to say, ‘Well, let’s make sure this is consistent with the policy.’”

Bjorklund said he is sure the Navy will permit exceptions to the rule “because sometimes you need to make those investments to experiment with solutions that could be as mundane as handling electronic medical records in a better way or something as sophisticated as rocket science or trying to understand trajectories of ballistic missiles.”

The Navy decision is not a ban on buying servers, said Trey Hodgkins, vice president for national security and procurement policy at industry association TechAmerica. “It’s a ban on individual acquisition authorities going out and buying their own servers.”

He explained that “you can’t just go off on your own and buy a server and create a server-based capability in a one-off location.”

Such a decision will have to accord with all the other federal cost-savings activities, including data center consolidation, the budget freeze and the Office of Management and Budget’s Cloud First initiative, Hodgkins said.

Federal CIO Vivek Kundra, in unveiling the government’s 25-point plan to improve how government buys and implements IT, said the administration aims to reduce the number of federal data centers by at least 800 by 2015 and also is shifting to a governmentwide cloud-first policy within the next 18 months.

“OMB’s intent is that when [agencies are] looking at a competing base capability [they are] supposed to first determine whether or not you can do it in a cloud,” he said.

So the Navy decision “is not something that should be a surprise to anybody because I think OMB has been pretty clear, as has DOD. In fact, prior to the OMB push I can remember talking to the Army four years ago on how they were moving out on consolidating their data centers, and what a task that was,” Hodgkins said.

But he acknowledged that there will be “some acquisition elements in the government that are going to bristle at the idea that, you know, ‘I want to do this and I can’t now.’”

Angie Petty, principal analyst at market research firm Input, agreed that the Navy decision is in line with DOD and civilian agencies’ goals to reduce their IT infrastructure and consolidate their data centers.

“In fact, the Army put out the same memo essentially back in June,” she said. “So it’s just kind of going down the path of trying to reduce the DOD as well as the government IT footprint.”

“It’s all in the same attempt to reduce the IT footprint, energy usage and reduce costs for data centers and IT infrastructure,” Petty said, and added that the transition to the cloud and data center consolidation over time should provide large savings for the agencies.

“The question is how soon can they get there?” she added.

Although the Navy decision will definitely put a strain on VARs and could result in a short-term decrease in reseller sales, “as the agencies and DOD are putting their consolidation plans together, it may increase their need for things like blade servers because some of the servers they have in place right now are older and can’t be virtualized,” she said.

Petty said that VARs and other suppliers should try to work with their customers in formulating their data center consolidation plans.

“There’s a kind of dynamic push and shove because you’ve got the budget constraints, but you have to spend money in order to save money, and so there is definitely going to be that kind of seesaw effect,” she said. “I don’t think you’re going to see a huge, huge amounts of extra spending, but I think they’re going to be a lot smarter about what they’re spending their money on.”

Petty said cloud and virtual IT providers stand to gain the most from data center consolidation moves, but she cautioned that some skepticism remains. “There is still some trepidation and kind of treading lightly on how quickly the agencies can move things to the cloud,” she said.

Tom Simmons, area vice president of the U.S. public sector at Citrix Systems Inc., a provider of virtualization solutions, said: “From our perspective, it really does create an atmosphere and opportunity where we can show, in a time of need, the Navy customer how we can come in and really have a material, positive impact under this mandate.”

“The Navy has historically looked for ways of, maybe not bleeding-edge, but looking at leading edge technologies in the information technology world to solve problems,” he said. “I think this is just another decision in that legacy by folks that are faced with budget issues.”