| Small IT Firms |
Government Demand Surges for Technical Expertise IT consulting revenues from government work swell as outsourcing projects proliferate at all levels.
By Ed McKenna
Over the next three years, 90 percent of government organizations worldwide will be looking to external service providers for information technology support ranging from consulting to outsourcing, according to an analyst with the Gartner Group of Stanford, Conn.
"IT skills are at a premium," said analyst Linda Cohen. Under continuing pressure to reduce budgets, federal or national governments will not be able to pay for the management needed for their information technology structure, she added.
As a result, IT consulting revenues from government work are expected to swell as consultants provide strategic IT guidance and business process re-engineering to help government departments adjust to the new, leaner environment.
"What we're generally doing is helping [the departments] redefine some of their strategies by looking at their policies and what needs to be changed, and then helping them with business process re-engineering with organizational issues [and] with their IT strategy," said John Cherbini, vice president for
global consulting services, global government industry, at IBM Corp. in Washington.
Pegged at $469 million last year, U.S. federal government spending on IT consulting is expected to more than double by 2001, said Marianne Hedin, an analyst at International Data Corp., Framingham, Mass. The chief beneficiaries of this trend will be Computer Sciences Corp., EDS and IBM, companies with track records in government work that are able to provide not just consulting but also systems integration and outsourcing if needed.
"There's no way that the big players can do it alone," added Cohen. "They're going to have help from some of the smaller players that are more focused on the enabling technologies,"
Spurred by stories of taxpayer abuse at highly charged congressional hearings this fall, legislators on Capitol Hill are hammering out sweeping reforms of the Internal Revenue Service. While taxpayer testimony provided the human interest, IRS mismanagement of a $3.3 billion upgrade of its computer systems provided the initial spark for the reform effort.
Members of Congress recently confirmed President Clinton's choice - Charles Rossotti, founder and former chairman of American Management Systems Inc., Fairfax, Va. - to head up the agency. With that background, Rossotti brings a wealth of management and technology expertise to the job.
The IRS is not the only agency that has been cited for its shortcomings in managing big-ticket IT programs, however.
In one of many reports detailing government IT shortcomings, the General Accounting Office said earlier this year that a $145 billion investment in IT over the past six years "has yielded poor returns in reducing federal operating costs, improving performance, supporting sound financial management, achieving mission results and providing quality service to the American public."
In past years, members of Congress enacted legislation designed to boost agency management accountability and sweeping procurement reform. Two such vehicles were the Government Performance and Results Act of 1993 and the Information Technology Management Reform Act passed in 1996.
Along with budgetary pressures, these laws have forced agencies to focus more on their core policy responsibilities, he said. They also have prodded agency officials "to look at how they can maximize what is available inside government and use more effectively the outside IT community," said Chuck Girard, managing principal of government consulting services for Electronic Data Systems Corp. of Plano, Texas.
While still in the early stages, "a sea change is afoot that will benefit both the government and, of course, the taxpayer," he added.
Another catalyst for changing the way agencies manage their programs is the Clinton administration's National Performance Review. "A lot of the initiatives behind the improvements from the NPR are enabled by information technology," noted Dennis Doughty, a senior vice president in worldwide technology business at Booz-Allen & Hamilton, Inc., McLean, Va.
But much of the information technology now in place "is not up to meeting the challenges required so there is a lot that needs to be redone," Doughty said. For example, government officials want to shift traditional welfare payments, unemployment checks and food stamps into the digital arena allowing a high-tech and low-cost Electronic Benefits Transfer.
"There is no doubt that those things could be done, but not within the framework of current government organization because it would displace a lot of jobs and cause a lot of trouble," said Cohen.
Procurement reform has spurred flexible contract vehicles and opened the government's door to the use of commercial off-the-shelf solutions.
"The new contract vehicles allow us to get to work much more quickly," said Therese Morin, a partner with Coopers & Lybrand, Arlington, Va. "We spend a lot less time developing huge proposals like we used to in response to huge requests for proposals," she said, adding that the quick turnaround allows the government to stay on top of the technology.
For example, the IRS Modernization PRIME Integration Services Contract "is extremely open and flexible [and] different from the normal federal procurement," said Donald E. Brown, vice president of CSC's Integrated Systems Division, Falls Church, Va.
"Where typically in a federal bid you get a very rigid specification that everybody bids to, in this procurement the IRS has established a vision [and] a blueprint [showing] how to get from here to there," said Brown. "But beyond that, they want to bring on a partner who is capable of helping them get there."
Consulting is an important component in the contract as the IRS blueprint requires the contractor "not just to automate what [the IRS is] doing now, but to actually look at the IRS in terms of re-engineering," said Brown.
For this procurement, contractors must include in their initial bids a plan for doing business process re-engineering, he said. The final request for proposals will be released Jan. 15, 1998, with proposals due by May 1. Slated to be awarded in October, the entire project is expected to be worth between $2 billion and $8 billion, industry officials say.
Consulting also played a key role in EDS' effort to help the Immigration and Naturalization Service streamline its border-crossing operations. Begun two years ago as part of a multi-agency effort, the task called for re-engineering the processes used to control the flow of people in and out of the United States, said Girard. Many technology changes were implemented through the project to speed up operations, he said. For example, some travelers can register with customs by simply putting their palm print on a machine, he said.
"As it turned out, we were the consulting organization and have done much of the border-based technology changes," Girard added. Exclusive of the consulting fees, the project is valued at roughly $350 million over five years.
"The consulting efforts involved a few million dollars over time, but it doesn't take a lot of dollars to have a major impact," he said.
Also, the General Services Administration has introduced contract vehicles that allow agencies to select from a variety of pre-approved private-sector services. Under the GSA Federal Telecommunications Service Technical and Management Support Services contract, agencies throughout the government can use the services of several major vendors, including Booz-Allen. Valued at about $3 billion, the large indefinite-delivery, indefinite-quantity contract offers agencies a much wider variety of choices than if a contract shop put out its own RFP, said Doughty.
Currently offering similar vendor access for data center services under its Virtual Data Center program begun early this year, GSA is now considering bids for its Seat Management Program, a comparable program for the desktop environment. Contract awards are expected March 1, 1998.
"There are probably 10 to 15 of these vehicles across all the different agencies," said Jack Winters, vice president of IBM global services, government industry. "We probably don't need a lot more vehicles but the thing we need is for agencies to begin to use them."
And progress on that front has been slow. To date, only the Department of Education has placed a task order against the Virtual Data Center, said John P. "Pat" Ways, group vice president of business development for CSC's Systems Group, Falls Church, Va.
"At senior levels of government - the secretary and deputy secretary levels - there is a great desire to put more work in the private sector," said Ways.
"Where you run into problems is when you get down into midmanagement levels where there is a lot of protection of turf going on."
Shying away from radical changes, agencies have been largely opting for a more tactical approach.
"They really pick their spots to bring in IT consultants at the strategic level," said Debora Del Mar, vice president of business strategy at AMS. "They're trying to do it on their own and just look [outside] for people to help implement or do the detailed work," she said. "I think they really want to be more in partnership, but they don't really understand what that means. ... It's hard for them to embrace it the way it's done in the commercial world because of a lot of the legal and contractual issues."
In addition, some government agencies have had trouble embracing commercial off-the-shelf technology, she said. Earlier this year, for instance, AMS pulled out of the bidding for NASA's new Integrated Financial Management Program contract because of that agency's resistance to off-the-shelf solutions, she said.
However, in April, the company did land the Defense Department Standard Procurement System contract, valued at $235 million. Under the departmentwide contract, the company's Procurement Desktop product will be used at 1,000 DoD sites, she said.
"The DoD is finally at a point where the rubber is meeting road for them," she explained. "We are seeing much more openness. ... There's a big job going on in the Army Materiel Command, for example, where they're modernizing their wholesale logistics program, and the Army is casting the net very wide within industry" and asking for feedback, she said.
For small and medium-sized companies, the changes mean more opportunity, but also competition from "the big boys," said Suresh Shinoy, vice president of marketing at Information Management Consultants Inc. in McLean, Va.
Free of the "country club atmosphere" of the private market, the government has long been a fair market for smaller companies, he said. "As the procurement practices change, hopefully that element won't go away, because there is a lot of innovation and enterprise in small and medium-sized companies that needs to be fostered by the federal government," he added.
Information Management Consultants is working on a number of government projects. As a subcontractor to EDS, for example, it developed the imaging application on the INS project. It also is helping the Veterans Administration re-platform its loan guarantee system to a modern architecture.
Specializing in management solutions, Robbins-Gioia Inc., Alexandria, Va., has done work for the Patent and Trademark Office and the
Defense Department. For the latter, "we put in a solution called the Program Depot Maintenance Scheduling System, which is used to manage the overhaul and maintenance of every major weapons systems in the DoD inventory," said Jim Karwel, the company's executive vice president for business development.
I/G Enterprises Inc. of West Chester, Pa., has provided electronic mail and messaging guidance to the Federal Drug Administration and Printing Office.
"We are providing the Printing Office with one of our software solutions along with some consulting to help them migrate from one mail environment to another," said Tony Ioele, president and chief executive.
A Microsoft solutions provider, QuickStart Technologies of Newport Beach, Calif., helped U.S. Army Fort Irwin, Calif., replace its outdated e-mail system with Microsoft Exchange Server and provided training through its technology mentoring services.
"At Seal Beach Naval [Weapons Station, Calif.], we provided some Windows NT design and [Microsoft Systems Management Server] implementation strategies and tech mentoring as well," added Sal Manso, vice president of solutions consulting services at QuickStart. n
Jack Winters, vice president of IBM global services, government industry
J. Pat Ways, group vice president of business development for CSC's Systems Group
Donald Brown, vice president of CSC's Integrated Systems Division
Jim Karwel, executive vice president for business development at Robbins-Gioia
John Cherbini, vice president for
global consulting services, global government industry, at IBM Corp.
Copyright 1998 Post-Newsweek Business Information, Inc. All rights reserved