Inside the government strategy of Capgemini's new CEO

EDITOR'S NOTE: This story first appeared on FCW.com.

Barely six weeks into the job, Capgemini Government Solutions CEO Doug Lane knows what he wants from his new colleagues.

With a couple hundred employees, the U.S. public sector arm of the consulting and accounting giant is "undersized for what we could do in the market," Lane said in a recent interview. "Based on the capabilities we have, we should and will be operating much more like a large business over the next few years."

The paradox of a subsidiary of a 131,000-person multinational firm being a small fish in Beltway contracting is not lost on Lane. And he intends to swing with the weight of Capgemini's global brand when bidding for contracts.

"We are a relatively small player in the federal government business today," he explained. "But we’re part of a very large business, so we’re in a unique situation where we have lots of things that the government buys. They've not necessarily seen them from Cap[gemini], so we think we can be differentiated in the market."

Lane aims to use some of his big business experience, which includes years as a PricewaterhouseCoopers partner focusing on IT services, to make CGS act more like a big business. "My background is pretty tailored to what we do here," he said.

"Firewall" might have been the most common word used during FCW's conversation with Lane and some of his colleagues at CGS offices in southwest Washington, D.C. It refers to how the subsidiary casts itself as both apart from and connected to its global parent company.

"I like to think of it as a one-way firewall," said Barbara Rosenbaum, vice president of federal public sector at CGS. "We're very limited in what we can tell the parent company. However, we can very much leverage the parent company in terms of capabilities." The firm is known globally for its work on tax and management issues. One of its bigger government clients abroad is Her Majesty's Revenue and Customs, the United Kingdom’s taxing authority.

"Our experts from Europe are over here all the time talking to our clients, who are very happy to talk to them and hear about some of the things that are being done globally," Rosenbaum said. "So, for example, in the public security space, we have a policing solution that’s been implemented in Europe and that we are talking to clients about that in the U.S. as well."

U.S. agencies in sight

Aside from a contract with the Air Force, CGS does not do much work with the Defense Department, Rosenbaum said. The federal client with which CGS works most is the Department of Homeland Security, followed by Justice and Agriculture, she reckoned.

CGS is, of course, pitching other prospective federal clients. The firm is hawking its case management service, used by the HRMC in Britain, to the Government Accountability Office and the Department of Health and Human Services.

But Lane wants to see his firm make inroads at agencies by working with "adjacent" divisions within those agencies that may share similar missions. So, for example, a theoretical contract with DHS's Immigration and Customs Enforcement division might lead to one with the agency's Transportation Security Administration.

One of the firm's big DHS contracts is for EAGLE II, the department's $22-billion purchasing vehicle for IT services. CGS is handling part of the "Independent Verification and Validation Services" (IV&V) for the project, ensuring that IT services available to DHS meet the department’s standards.

"One of the things that we're seeing in DHS is a move towards agile development," Rosenbaum said. "And so we're looking at how we use IV&V in an agile development mode." The USDA is also using CGS's IV&V service for a huge agricultural subsidy program known as MIDAS.

Federal agencies are also looking for enterprise resource planning (ERP) tools because of their ability to help manage huge bureaucracies, and Lane would like to CGS go further in that field.

"We have not traditionally played a big role in core ERP for government clients, but that's another area [where] we have a great capability," he said. "We're going to start to introduce it to our clients over the next couple of years as well."

A tough market to crack

Cracking the federal market for enterprise software is easier said than done. Despite name recognition and a global presence, it took software giant SAP years to make inroads, said Tim May, chief marketing officer at Salient Federal Solutions, a federal software and networking vendor. "A lot of it has to do … with the applicability of the software suite. Is it a need [in] the federal government?" he said.

To succeed in the federal enterprise software market, a relatively new entrant must be willing to spend money, said May. "I think it would be wise" for such a firm "to align themselves with an industry partner, in order to help them get positioned in the marketplace," he added.

CGS has shown a willingness to invest in the federal IT market. After its focus turned to the U.S. public sector six years ago, the firm spent several million dollars on domestic markets like health care, verification and validation systems and ERP, then-CGS CEO Joe Moye told Washington Technology, an FCW sister publication, in 2010.

Incumbency has its drawbacks, too, which might help CGS with its U.S. public-sector foray. In tight fiscal times, when every push for a government contract is like "a knife fight in a phone booth … sometimes incumbency can be a disadvantage, because you have a workforce that has been there a long time," making it more difficult for incumbent firms to hire and fire employees, said Katell Thielemann, a research director at Gartner, an independent IT research firm.

Traditionally commercial-sector vendors like Amazon Web Services are "shaking [up] some of the established processes" in the public sector by satisfying an increasing government demand for multi-award contracts rather than large-scale, multi-year contracts, Thielemann said. The Defense Department has approved at least two of AWS's cloud offerings to compete for cloud computing contracts issued by the Defense Information Systems Agency, as FCW reported in March.

CGS might hope to emulate AWS's leveraging of commercial-sector expertise for government clients. AWS has a "completely disruptive not only technology, but business model," which features heavy investments in FedRAMP security accreditations and more flexibility than a traditional "requirements-based" federal systems integrator, Thielemann said.

A flexible business model could also help CGS make a bigger dent in the public sector market. MicroPact, which competes with CGS in case management, has opted to sell case management as a product rather than a service, by putting R&D into the former, she said. That helped the Herndon, Va.-based firm sell a standardized product across multiple agencies and carve out a niche for itself in an increasingly commoditized federal software market, she said.

A promising 22 percent of Capgemini's (the parent company) $13.5 billion in revenue last year came from the public sector, according to an annual report. Time will tell if CGS can use its parentage as a springboard into the U.S. public sector.