Strategies for success: How top small and mid-size companies survive in federal IT market

Michael Barbee believes his company is not quite ready for prime contracting in the federal information technology arena, so it works as a subcontractor about 80 percent of the time. "Until we get a larger presence in the government market space, I firmly believe that priming is premature. We want a foothold as a network services provider first," said Barbee, president of WAM!NET Government Services Inc. of Herndon, Va.Ray Muslimani doesn't want to be a subcontractor at all. His business, Global Computer Enterprises Inc., goes after prime contracting opportunities exclusively. "It would have been a whole lot easier to say 'Let's find a big company and pitch our services to them,'" said Muslimani, president of the Gaithersburg, Md., firm. "You really have to believe from the top down you are good enough to prime. A lot of forces around you are telling you not to."Barbee and Muslimani, while espousing opposite strategies for growth, grapple with the same problem: how to succeed in the rough-and-tumble federal market if you're small. Small and mid-size companies face special challenges. Many agencies are bundling IT requirements into contracts too large for small firms to pursue as prime contractors.Although the government has set-aside programs for small businesses, agencies are missing their targets, according to congressional scorekeepers. At the same time, many mid-size firms that have grown too large for the government's small-business programs find it difficult to compete against the billion-dollar companies that dominate the federal market. Still, the opportunity for these companies remains big. The federal IT market will reach an estimated $54 billion in 2003. While the 20 largest integrators will grab about 50 percent of the prime contracting dollars, tens of billions of dollars remain for other competitors to claim, either as primes or subcontractors.Despite their differing approaches, Barbee and Muslimani have common views on what it takes to succeed: innovative solutions, strong relationships with government customers and judicious decisions about the jobs they pursue. They and other executives of winning small and mid-size federal IT contractors offered the strategies in this report for success.