Inside AT&T's strategy to grow its federal business

At AT&T, the secret to success is business as usual. And a multibillion-dollar innovation budget. And a strategic position at the heart of today’s technology needs.

“In today’s today and age, I cannot think of any government mission that is not dependent on or doesn’t touch some sort of communications technologies,” said Kay Kapoor, president of AT&T’s Global Business – Public Sector Solutions division. “These include mobility, Internet of Things, cybersecurity, cloud, unified communications and network transformation items. Being part of a premier integrated communications provider, we feel very, very good. Not only are we bullish about our future in this space, but the fact that we continue to give back and serve our country in some small way makes us feel really good.”

With revenues of $148.6 billion, up 10.8 percent over last year, Kapoor has reason to feel good. Her division is part of the company’s largest segment, Business Solutions, which accounted for nearly half of AT&T’s 2015 total segment operating revenues.

This year, AT&T holds the No. 14 spot on the 2016 Top 100 list with $1.9 billion in federal prime contracts during fiscal 2015.

One big opportunity on the horizon is Enterprise Infrastructure Solutions (EIS), the follow-on to Networx, a set of contracts AT&T is part of that connect federal agencies to network services. It’s set to expire in 2020. The $50 billion EIS, which GSA expects to make available to agencies in fiscal 2017, is the first contract to implement the Network Services 2020 strategy for the next generation of telecommunications and information technology infrastructure services.

EIS will cover technologies Networx didn’t simply because they didn’t exist when the General Services Administration made Networx awards in 2007, Kapoor said.

“EIS is structured to help agencies address foundational infrastructure and managed services like virtual-private networks, Ethernet and regional telecommunications,” she said. “This allows them to address what we call strategic services, such as IT convergence, software-defined network, mobility – which was not there on the prior one – cloud, hosting, definitely Internet of Things, and cyber.”

A key contract win for the company in 2015 came from GSA’s Office of Fleet Management, which awarded a five-year blanket purchase agreement that lets the 75 agencies who lease or purchase 200,000 vehicles through GSA to add AT&T’s vehicle tracking, monitoring and diagnostics capabilities, Kapoor said.

With the December 2015 award of a three-year contract, the Education Department made AT&T its primary mobility services provider, and a year ago, the company signed a five-year agreement with the Federal Communications Commission to provide an IP solution that supports mobile and cloud-based applications, enabling FCC offices and data center to change network and internet needs on demand.

When it comes to the future of technology, AT&T relies on its past. It draws on its historical use of laboratories to innovate new products. In 2015, the company invested $21 billion in network and associated technologies, which is on par with what it has spent in the past few years.

“Our company invests billions of dollars in technology innovation first and then we customize and scale, we ensure security and privacy, and after all of that is proven, then we bring it to the market and deploy as what we call a managed service,” Kapoor said. “What this gives our customers is our customers can buy by the drink. They buy only what they need, they scale up and down, and pay for exactly what they use.” 

Looking ahead, Kapoor sees opportunity in software-defined networks, which decrease hardware costs for agencies, scale easily and let customers have solutions where they need them. Converged technologies -- bringing together mobility, analytics, cloud and cyber – are also ripe for growth. “Very rarely do we see a solution that is only one thing,” she said.

“We’re seeing tremendous growth in our Internet of Things business,” Kapoor added. “Across AT&T we are today connecting 1.9 million fleet vehicles and, for example, 280,000 refrigerated containers. I believe this is going to change the way organizations look at logistics and logistics control.”

She doesn’t worry much about cybersecurity or marketplace slowdowns – two main challenges in the federal IT space. Cybersecurity is a primary focus area for the company and at the core of everything it does. With 107 petabytes of data crossing its network – or one-third of the world’s internet traffic – AT&T pay close attention to cyber trends, Kapoor said.

“The pace of technology is such that we can very easily turn challenges around,” she added. “When we see slowdowns in funding, for example, technology usually comes to the rescue. We can take the same funding from a prior solution and provide the innovation of today and make it a lot less expensive.”

The coming change in administrations also doesn’t faze Kapoor, who said that some agencies are slowing down to put money against projects that will carry them through the transition.

“With the new administration, I am sure they will bring their priorities to the forefront. We do not see a world where technology is slowing down any time soon,” she said.