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

Tips from the trenches

"Learn to delegate. When I started the company, I wore a lot of hats. I was responsible for [everything from] paying the bills to invoicing. I hired a vice president of finance." | Robert Baesch, chief executive officer, Baesch Computer Consulting Inc., Glen Burnie, Md.

"Understand the customer's problem beyond what's in the RFP." | Michael Barbee, president, WAM!NET Government Services Inc., Herndon, Va.

"If you hope a larger firm will see your inherent value and give you work, not much will happen. Large firms are good at making it easy to buy from you once you have marketed to the government. No one is going to tell your story [to the customer] better than you." | Michael Beckley, vice president of business development, Appian Corp., Vienna, Va.

"Invest in a proposal center. Our win rate has gone up by 25 percent as a result." | Gregory Freeland, president, RGII Technologies Inc., Annapolis, Md.

"You have to believe from the top down that you are good enough to prime." | Ray Muslimani, president, Global Computer Enterprises Inc., Gaithersburg, Md.

"Price is perishable; trust and understanding of business needs is not. You have to talk to your customer, understand where they are and where they are trying to go. You need to be able to add value in that process." | Gary Newgaard, president, Paragon Systems Inc., Herndon, Va.

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.

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