Big Outsourcing Projects Entice Integrators

Big Outsourcing Projects Entice Integrators

By Nick Wakeman

Federal information technology companies face myriad issues in 1998 but none more vital than adjusting to the fallout from sweeping procurement reforms, solving year 2000 problems and jockeying for two multibillion-dollar outsourcing opportunities.

NASA's Outsourcing Desktop Initiative and the General Services Administration's Seat Management contracts are expected to total more than $12 billion.

Each contract will cover the maintenance, upgrading and servicing of agencywide desktop computers and networks.

Managing those computers and networks is a difficult task, said J. Pat Ways, vice president of federal business development for Computer Sciences Corp., El Segundo, Calif. "I see ODIN and Seat Management really taking off," he said.

Ways and CSC aren't the only ones eyeing the giant outsourcing contracts expected to be awarded in the spring or early summer. Executives from IBM Corp., Armonk, N.Y.; Litton-PRC Inc., McLean, Va.; and Unisys Corp., Blue Bell, Pa.; said government desktop services will be important parts of their strategies for 1998.

Outsourcing desktop services is not just a trend or fad of governments, said Austin Yerks, PRC's senior vice president of business development. "This really represents a change in the way the government does business," he said.

The market for outsourcing will be one of "explosive growth," said John Nyland, vice president of marketing for IBM Global Government Industry, Bethesda, Md. "A lot of agencies will be very quick to explore [the NASA and GSA] contracts," he said.

PRC photo Austin Yerks, PRC's senior vice president of business development

Procurement reform has been a major catalyst for agencies to look at information technology differently, Yerks said.

Procurement changes during the past year have helped foster leasing, the wider use of the GSA schedule for services and blanket purchase agreements, he said.

"The tool box has changed," he said.

Agencies now have more choices, greater flexibility and can buy information technology more quickly than in the past, executives said.

The proliferation of contract vehicles is a trend that is likely to continue, said Ed Hogan, vice president of marketing development and planning for Unisys Federal, McLean, Va.

While procurement reform has created opportunities for companies to grow, widespread changes in the market also present hazards for contractors, according to company executives.

Big contract wins can turn into "empty vessels" if the government makes little use of the contract, Hogan said.

Unisys photo Ed Hogan, vice president of marketing development and planning for Unisys Federal

In the new contracting environment, companies need to define up front what the requirements are for projects and what is really to be accomplished, said Bob Fielding, vice president of programs for the systems integration group at TRW Inc., Cleveland.

"You need to nail those down so the expectations of the government and the contractor are well-defined," he said. "That has been a problem for a lot of companies."

Bob Fielding, vice president of programs for the systems integration group at TRW Inc.

The past year has seen explosive growth of large governmentwide contracts with multiple winners, greater use of the General Services Administration schedule and the beginning of wider government outsourcing.

"It is getting easier to do business," Nyland said. "Everybody has a GSA schedule and that is a good thing for government."

But the wide open selling atmosphere has been a source of confusion, said William Loomis, an analyst with Legg Mason Wood Walker, Baltimore. "There is confusion in both government and industry," he said.

Some contract vehicles have not performed as well as expected by industry because agency officials have so many choices they lose focus, he said. Meanwhile, some contractors haven't adjusted to the growing sales and marketing demands of the market, Loomis said.

A wild card in the federal market for 1998 will be the problem of fixing date codes in computer programs at all government levels.

A big question is still what proportion of the federal government's information technology dollars will go to the year 2000, said Paul Brands, chairman and chief executive of American Management Systems Inc., Fairfax, Va.

"This really is an issue that could affect other trends in the federal market," Brands said.

"Year 2000 work has to happen in a big way by the second half of 1998," Loomis said.