Integrators Tap Partners To Expand Expertise, Contracts
Integrators Tap Partners To Expand Expertise, Contracts
by Carole Shifrin
Changes in contracting over the past few years have accelerated the practice of partnering as a strategy for companies pursuing government contracts to the point where it is now rare for anyone to go it alone.
"I can't think of a single sole-source contract of any significant size," said Tom Burlin, vice president of federal business for IBM Corp. of Armonk, N.Y., adding that every federal project involves at least some level of partnership. "Partnering is very important."
The transformation in contracting involves both what the government seeks to buy and the procurement methodology it uses. In the past, the government tended to build large, uniquely developed projects to serve specific needs, Burlin said.
"Today, they're moving more to using commercial, off-the-shelf products and using integrators to provide commercial best practices. They've become more adept at specifying results and functional capabilities, and letting industry respond with commercial products that meet their needs," he said.
Because government also is looking for wide-ranging skills in omnibus procurements, even big companies with a variety of competitive products can't singly meet "the breadth of the requirements" being sought today.
"Buying patterns have changed," Burlin said, "so you have to align with partners to bring best practices to solutions."
Another factor cited for the increase in partnering is the growing emphasis on indefinite delivery, indefinite quantity contracts awarded to multiple firms. This type of contract allows the government to be very flexible and as responsive to the market as the private sector.
"Award of omnibus IDIQ contracts are driving partnerships," said Chick Babovian, president and chief executive officer of Vredenburg of Reston, Va., a solutions provider with electronic document management system and electronic Freedom of Information Act (FOIA) products among its offerings.
"What drives us to partnerships is to find a contract holder with a presence in that market space or a contract vehicle," Babovian said. For example, when the Federal Bureau of Investigation was looking for an electronic FOIA solution and saw Vredenburg's product, the agency liked it but had to figure out how to get it.
"We said, 'You can use Unisys,' " Babovian said. "Unisys is one of several omnibus IDIQ contract holders with the FBI. Vredenburg is now partnered with Unisys on the contract so the FBI can get its FOIA solution."
The growing number of partnerships takes all forms and includes some exclusive, long-term arrangements, but those appear to be in the minority. The majority seems to be deal- or contract-specific, according to many players.
Partners on one project often may be competitors on another, and some companies seek to be included on multiple teams in the bidding for a large procurement so they are not excluded if they had picked one team and it lost.
After developing good working relationships, though, some companies have acquired an equity interest in partners with key skills or knowledge to round out their portfolio or give them what they hope will be a competitive advantage in the contracting world.
American Management Systems Inc. of Fairfax, Va., in March made such an equity investment in govWorks Inc., an electronic government Internet portal developer. The move is part of an AMS strategy to create a comprehensive, interactive, around-the-clock, access-to-government product for consumers and businesses.
Other companies have gone further, acquiring outright companies with strong information technology skills and contracts to complement or extend their existing business. Earlier this month, Northrop Grumman Corp. agreed to buy Federal Data Corp., Bethesda, Md., which it intends to merge into its Logicon Inc. subsidiary. Federal Data, a Microsoft Federal Alliance Partner, is a leading provider of a full range of IT solutions, including high-end systems integration, network management and outsourcing, with a long list of its own vendor partnerships.
Last year, Bitco International, a procurement and technology solutions company, merged with Decision Support Systems, a national technology solutions distributor, under the Bitco Enterprises umbrella. The goal, company officials said, was to create an organization that offers a complete range of software, services, systems and components solutions to systems integrators and value-added resellers.
"We're where a classic integrator was 15 years ago," according to Bob Campbell, director of government sales and programs for Bitco Enterprises. "Now, because of their downsizing and focus on core business, we're doing a lot of what they used to do."
Outsourcing by government and industry has allowed companies such as Bitco to prosper, filling a role the major companies no longer desire.
Part of the distribution channel, DSS works with manufacturing vendors essentially to warehouse components and provide them to integrators, resellers and others.
"We're one of the sources for products, systems and solutions they have to look to," Campbell said.
The company, which maintains a 60,000-square-foot warehouse with an estimated $5 million to $15 million in inventory, doesn't deal with the end users and holds no government contracts, but is an essential part of the
"This is the type of relationship manufacturers want to have," he said.
So do the integrators, which Campbell said have reduced their overhead costs by eliminating large procurement shops and staffs by relying on DSS. The company does not have exclusive arrangements.
Electronic Data Systems Corp. of Plano, Texas, declines exclusive relationships but seeks team members that match opportunities, and lines them up ahead of the bidding.
"Every deal stands alone," according to Kevin Durkin, vice president of sales for EDS Federal. "You look at who has done business historically in the agency you're going after. You look at strong past performance in that agency. You look at who has the capabilities to deliver functional areas you don't have."
He said EDS also looks at chemistry: Do the cultures of the two companies work well together?
Another important source of partners is the wide and growing range of small companies ? women-owned and minority-owned businesses and companies in economically disadvantaged HUB zones ? whose services and products government agencies seek to include in all contracts in significant proportions.
IBM works to keep an ongoing portfolio of these companies to work with, Burlin said, and also seeks to develop these companies in its protege program.
NIC Commerce of Reston also eschews exclusive partnerships as "too limiting," said Fred Norman, director of state and local business development for NIC Commerce. "You don't know what customers will require in the future."
However, NIC Commerce does have what Norman described as "very strong relationships with certain partners," such as that with Deloitte Consulting. "So when we have a requirement for consulting, for example ... our preference is to go with a very strong, trusted alliance partner."
The decision regarding which partner takes the prime role and which partners take subordinate roles depends on the customer's core requirements, he said.
NIC Commerce's business, 100 percent focused on government, is spread about equally between prime and subcontractor work, Norman said.
AMS is one company that sees value in establishing partnerships that go beyond a deal-specific approach.
"Within the last few years, we have selected a few very key partners which we believe are 'best of breed' and can over time deliver broad integrated solutions to our clients," said Donna Morea, executive vice president of the company's state and local government group.
The company believes the approach benefits both the clients and the partners more than deal-specific arrangements.
"It's like going with different dance partners," she said. If you develop a relationship with a specific partner, the partnership gets better with practice, experience, and dancing in different venues and in different situations, she said. In contrast, changing partners with each deal could introduce an element of risk in the work for clients.
"We have a handful of very deep, strong partnerships: Siebel Systems, Ariba and govWorks," Morea said. "In each case, we are working together to integrate our solutions, our approaches, our competencies. I like to say one plus one equals more than three."
While the relationships are not necessarily exclusive, in each case there are targeted areas in which the partners work predominantly with each other, Morea said. Siebel, a leading provider of customer relationship management software, and AMS, for example, have targeted the area of tax and revenue work as one area for their partnership.
One project they are working on for the Virginia Department of Taxation integrates Siebel's customer call center component, developed for the private sector, with work AMS is doing to re-engineer the state agency's tax operations.
"That's the reason we have partners," Morea said. "We can take their specialized software component and skills and use it with our understanding of entire enterprise needs."
AMS carried its budding relationship with govWorks, a leading portal provider, a step further when it acquired an equity stake in the company this spring. The alliance is to develop jointly software applications that will connect the govWorks portal to the computer systems of participating government agencies.
The partnership combines govWorks' front-end solutions, such as online licensing and permitting, with AMS' "deep understanding we have of how those transactions are enacted at the back end," Morea said.
While the equity investment was a relatively unusual move for AMS, Morea said, "we believed that it was important for us to have a really close alliance, a strategic relationship because products and solutions needed to be tightly integrated."
As a result, there is a substantial element of exclusivity in this alliance. "They are our 'exclusive portal partner,' and we are their 'exclusive systems integrator' in the public sector in government jurisdictions over 250,000 people," Morea said.
Although it doesn't rule out deal-specific partnerships, Oracle Corp. seeks to build relationships that have some longevity, according to Sherrill Clements, vice president of alliances for Oracle Service Industries. If an effort with a partner is successful in one agency and can be repeated in another, so much the better.
"Reusable components, repeatable solutions," Clements said. This approach reduces costs since the solution is proven and makes the output of a business relationship more commercial, he said.
"Wherever we can, we try to build a compelling story so that business partners don't want to go elsewhere," Clements said. That objective is furthered when a partner's investment in building and training a staff pays off with multiple contracts.
And partners that work together on multiple projects develop a better understanding of how the other does business, communicate better and learn what to expect from each other, he said.
The selection of partners in the growing state and local government marketplace is at least as complicated as picking partners for federal programs, and maybe more so.
Dan Brophy, senior vice president of marketing for Lockheed Martin IMS of Washington, said partner selection is a balancing act and always includes the special skills and best of breed criteria. But there are subtleties that have to be balanced, he said.
"You have to look at it from the point of view of those who will make their decision. It's not just the best of everything," he said.
"Let's say company A was nationally the very best at doing a particular function; you could try to sell company A as part of the team. But what if company B is viewed as a hero in that particular locale?" he said. "Sometimes local area experience is the deciding factor."
There appears to be no dearth of potential partners. While some think the market may be more concentrated because of consolidation among some primes, IBM's Burlin believes the market has become more diversified for partners.
The dot-com phenomenon has put a lot of new players in the market, he said, with many, particularly those developing Web expertise, gaining market recognition in a short period of time.
"Customers are looking for these companies to be included," Burlin said. "They encourage diversification."
Government agencies are looking for varied suppliers, small firms that are high-risk takers or in the high-investment phase of development, and those on the cutting edge. "You're rewarded for bringing in these companies," he said.
"Still, I think there's a certain amount of stability from having brand names, like IBM, as the foundation, or anchor, for a team," Burlin said. "So, IBM ... and out-of-the-box type of firms sometimes [make] a very good partnership."
It still is a challenge and often takes a fair amount of legwork, though, to find the right firms to partner with, according to officials from many companies.
Oracle's Clements said the company is always surveying the market, going to trade shows, looking at industry reports and correspondence, examining products and inspecting potential partners.
Prime contractors, too, are always cognizant of where the buck stops, they said.
"The prime takes on the ultimate responsibility for delivering on the project," IBM's Burlin said. That means taking on the "risk of being able to step in if a firm doesn't perform as expected."
Even with getting the right partners on board and making sure each has as clear understanding at the front end of their responsibilities, contractors said projects can fail in good companies and bad.
"No one is immune from contract performance problems," one said.