Desperately Seeking Partners

Small Businesses in Search of Integrators <@VM>It Pays to Have Friends in High Places

Gwen Johnson

Richard Jennings

Todd Ramsey

David White

Bardon "Buzz" Blizzard

The barrage of phone calls and e-mails started last October, immediately after Electronic Data Systems Corp. was announced the winner of the $6.9 billion Navy-Marine Corps Intranet contract.

As many as 50 companies a day would call EDS, seeking a spot as subcontractors on the prestigious contract. That's in addition to the hundreds of hits EDS received on the Web site set up to help recruit small businesses to the contract, which will provide a broad range of desktop, network and telecommunications services over eight years to the Navy and Marine Corps.

Even now, Gwen Johnson, the EDS official who oversees the small-business activity on the NMCI contract, might get a dozen new inquiries during the day from companies interested in participating on the project.

"That's good for us, because we're still looking for good companies," she said.

Getting the Big Boys' Attention

Here are some questions a small business should ask itself if it wants to partner with systems integrators on large government contracts:

? Does our product or service provide value that the government customer wants and is willing to pay for?
? Have we read the procurement documents relating to the project for which we want to be selected as a subcontractor? Does our product or service address specific requirements or problems described in those documents?

? Do we have an existing relationship with the customer that can help the systems integrator understand the customer's culture and needs ? and help the integrator win the contract?

? Do we have a good record of past performance with the customer?
? Do we have a viable long-term strategic plan?

If the answer to each question is yes, you are the type of partner systems integrators are looking for.

EDS, which had already signed up 20 small businesses for its team during the bidding process, is continually adding subcontractors to the project and expects to have well over 100, Johnson said. The systems integrator, with 121,000 employees and $19.2 billion in annual revenue, also is trying to bring onto the project many of the Navy contractors that are being displaced by NMCI.

"In our proposal, we said that at least 40 percent of the contract value will go to small business," she said. "Our objective is to exceed that."

Securing a place on large federal procurements is be-coming more important for small information technology companies hoping to do business with the government. That's because federal agencies are turning to large, agencywide procurements for their IT products and services.

In essence, the agencies are bundling many of their small IT contracts into larger procurement vehicles that are awarded to a single prime contractor.

In NMCI, for example, EDS and its subcontractors are responsible for providing voice, video and data services, networking, training and equipment to some 360,000 sailors and Marines around the world.

Services such as these previously were provided by companies that won smaller, separate contracts directly with the Navy. Now those companies must hope to win a place as EDS subcontractors.

"It's vital to your business prospects to become aligned with the larger contractors," said Rishi Sood, a public-sector analyst with Gartner Dataquest in Mountain View, Calif. On the large government contracts, Sood said, systems integrators "become like general contractors who are managing a lot of smaller contractors."

But the need for partnering is not one-sided, said industry officials. The integrators need partners, too. Many federal projects require that a certain percentage of the work go to small businesses or to minority-owned and disadvantaged small businesses.

Likewise, the government's demand for off-the-shelf products also pushes the integrators to partner with companies that have ready-made solutions. No company has all the skills and products to go it alone on the large government projects.

Like EDS, most integrators have departments and staffs that evaluate potential partners and then manage the ensuing partnerships.

But with hundreds of high-tech companies competing for partnerships and teaming arrangements, how does a small company catch the attention of the prime contractors leading government projects?

"You must have a specific solution for a specific requirement for a specific deal," said Richard Jennings, a vice president with Computer Sciences Corp. of El Segundo, Calif. The company has nearly 60,000 employees and $9.4 billion in annual revenue.

Jennings heads up CSC's outsourcing project with San Diego County, a seven-year, $644 million contract that calls for CSC to provide the bulk of the county's IT and communications services, including desktops, data centers, networks, applications, technical support and telecommunications. The company won the contract in October 1999.

In addition to CSC's three formal partners ? Science Applications International Corp., Pacific Bell of SBC Communications Inc. and Avaya Inc. ? the San Diego project has about 10 other partners, including six small businesses.

Jennings said CSC was flooded with calls from small companies when it was putting together a team to bid on the project. Many just offered general technologies for which they hoped CSC could find or even manufacture a need.

The companies that grabbed Jennings' attention, however, were those that had actually read the county's procurement documents and knew what the county wanted.

"They did their homework, understood the county's emerging requirements and gave us a solution for a requirement or problem that the customer had," Jennings said.

Todd Ramsey, general manager for IBM Corp.'s global government unit in Bethesda, Md., said many small companies with good ideas or interesting technology are simply looking for the integrators to serve as marketing arms for their products.

IBM, however, is looking for partners that have what Ramsey calls a compelling "value proposition."

The products or services these companies offer "provide value in some form that the customer wants and is willing to pay for," he said.

IBM, one of the top systems integrators in both the federal and state and local markets, forms partnerships or teams with many companies on its government projects throughout the United States. But IBM last July also created a "Government Specialty for e-business" program that establishes closer alliances with companies that bring unique and complementary solutions to the partnership. (See related story.)

"We invite our partners to show their solutions with us at the [trade] shows," said David White, IBM's director of solution and business partner sales.

Another im-portant quality that small businesses can bring to a partnership is a close relationship with potential government customers. When putting together a team for San Diego County, for example, CSC looked for local companies that already had worked for the county and so understood its culture and business needs.

"We wanted companies that had an established presence and who were well thought of by the customer," Jennings said.

This led CSC to Computer Technology Resources Inc. of San Diego, a firm that was already providing IT services to the county. Computer Technology Resources had a good reputation, so CSC brought it onto the team.

Bardon "Buzz" Blizzard, a vice president for business practices for systems integrator DynCorp of Reston, Va., said that DynCorp's small business partners must also have a clear, viable strategic plan.

Before partnering with someone, DynCorp must be confident that the company can deliver what it promises and can keep pace with demand if the business grows as planned. After all, it's the prime contractor that takes the heat when problems arise.

"If there's a failure, customers won't remember the small company, they'll remember DynCorp," Blizzard said.

DynCorp employs 20,000 people and has annual revenue of about $1.8 billion from a variety of IT and outsourcing projects.

Blizzard, who manages the partnerships for DynCorp's Information and Enterprise Technology subsidiary, examines up to 40 small businesses a month as potential partners. He describes himself as an "honest broker" who makes sure that potential partnerships "make good business sense for us and for the company we're going to partner with."

Of those, perhaps five or six might be selected, with one or two chosen for DynCorp's mentor-protégé program in which DynCorp provides leadership and resources to help the protégé company achieve its goals.

"We're building a relationship for the long period," he said of the mentor-protégé program.

This, ultimately, is the prime goal of partnerships: to establish complementary relationships that pay off in a long-term stream of contracts for all participants.

For systems integrators, the search for small-business partners is a constant concern.

Even six months after the NMCI contract was awarded, Johnson continues looking for new companies to add to the EDS team.

Recently, after leaving her office for an hour, Johnson returned to find 10 e-mails from companies inquiring about NMCI.

"We are using small businesses in every aspect of the program," she said.

J.P. Haynes

Officials with JPH International Inc. learned firsthand the value of having a large, well-connected partner when the small Canadian firm was given space to show off its customer relationship solutions as part of IBM Corp.'s "City Hall" exhibit at a conference of U.S. cities being held in San Antonio.

Among the mayors and city managers visiting IBM's large exhibit at the December 1996 National League of Cities conference were representatives from West Palm Beach, Calif. The West Palm Beach officials stopped by JPH International's booth and liked what they saw of the company's IBM-based solutions for delivering information and services to citizens. Six weeks later, JPH International landed a contract with the city.

"Governments have confidence in large companies like IBM," said J. Paul Haynes, chief executive officer and president of the Waterloo, Ontario, company of 35 employees.

Consequently, having a close relationship with a technology giant ? IBM has more than 300,000 employees and $87 billion in annual revenue ? can carry a lot of weight with risk-averse government officials.

"No one ever got fired for hiring IBM," Haynes said.

The conference occurred more than four years ago, and since then, JPH International has forged an even closer relationship with Armonk, N.Y.-based IBM. Last July, the small firm, which has adopted IBM's e-business framework for its customer relationship solutions, was selected as one of four initial partners in IBM's "Government Specialty for e-business" program.

Under this program, IBM identifies what it regards as the best products and services for governments seeking to transform their operations and services. Thus far, IBM has selected seven companies for the partnership: Applied Systems Technology Inc., Anteon Corp., Environmental Systems Research Institute Inc., EzGov Inc., HTE Inc., JPH International and Sideware Systems Inc.

The partners share sales leads and market their products and services together as complementary e-government solutions.

"JPH has an outstanding product that's well-accepted in the market," said David White, IBM's director of solution and business partner sales.

White said IBM looks for partners that are financially viable, have best-of-breed solutions that are compatible with IBM's e-business framework and have proven expertise in the public sector. "There's a learning curve to get into the government market," he said.

JPH International was purchased in October 2000 by EVERS SA of Lyon, France, a documents management company. The privately held EVERS has 250 employees and annual revenue of about $25 million, Haynes said. JPH International, now the North American arm of EVERS, has more than 125 local government and utility customers.

Since the launch of the IBM partnership program, JPH International has contracted for new customer relationship solutions in Berkeley, Calif.; Cornwall, Ontario; and Clarkesville, Tenn. While these implementations are all in the $150,000 range, the company is now competing for city contracts ranging up to $4.5 million as part of a larger team of bidders.

"There's no way we would have been in those deals without IBM," Haynes said.

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