California companies seek federal dollars
D.C. area offices become requirement for those chasing government business
- By David Hubler
- Aug 06, 2009
Reversing Horace Greeley’s famous 19th-century advice to go west, Silicon Valley information technology companies increasingly are looking eastward, especially at Fairfax County, Va.
Their common goal is to weather the economic recession through government contract opportunities and some of the billions earmarked for technology funding in the new American Recovery and Reinvestment Act. IDC Government Insights analyst Shawn McCarthy estimated that there are $98 billion in IT opportunities in ARRA.
“There is a noticeable uptick in the interest level of California companies looking at the [Fairfax County] area because of the stimulus money,” said Gerald Gordon, president and chief executive officer of the county’s Economic Development Authority. “Also, as the economy falters, this is pretty much the only game in town for the moment.”
“If you’re going to do business with the government, you’ve got to be in Northern Virginia,” said Scott Padgett, vice president of global sales at Archaio LLC. “The government contract vehicles, the infrastructure, the partners are here.”
There might also be an added inducement for those IT workers who move east with their companies. Employees with security clearances in Northern Virginia can earn on average $80,173 a year compared to $73,636 in California, according to a recent survey by online career consulting company ClearanceJobs.com.
“The government is sexy now,” said Peter Ostrow, president and CEO of Technical Communities Inc., a contract management, transaction processing and marketing services firm in San Bruno, Calif., near San Francisco.
Technical Communities recently opened an office in Herndon, Va., and added 10 employees to its federal-sector business.
“Our business was growing so rapidly in the private sector and with nonprofits, we just felt it was a natural extension to move to the public sector,” said Daniel Burton, senior vice president of global public policy at Salesforce.com, a 10-year-old San Francisco provider of cloud computing technology.
Fortinet Inc., a Sunnyvale, Calif., provider of network security products, also opened a Herndon, Va., office this year because it has increased its government focus and wanted to serve its federal customers by lowering costs and increasing security, said Jeff Lake, vice president of federal operations at Fortinet.
“Federal customers have a critical requirement for comprehensive security, and in this economy, a very high bar for expense justification and" return on investment, he added.
Fortinet’s expansion is projected to more than double the nine-year-old company’s federal sales force, company officials said.
Greg Oslan, CEO of Narus Corp., also based in Sunnyvale, came to Northern Virginia in June in part to lease space for an office devoted to federal sales, professional services and custom engineering.
The office will replace a small satellite facility that the provider of IP protection and management systems and services has shared with another Northern Virginia company for the past few years.
“As our penetration into the federal space has grown and the amount of people that we’re adding to this location has grown,” he said, “it’s become evident that we need to pull everybody together under one roof and provide the security and the facilities necessary for them to operate as a team.”
“We absolutely want to be up and in before September,” Oslan said.
He said he expects to hire about 20 employees for the new office by the end of the year, but he is looking to lease space that will accommodate at least twice that number.
Such optimism might help explain why the Hilton Hotels Corp. recently announced it was relocating its global headquarters from Beverly Hills, Calif., to McLean, Va., forsaking Rodeo Drive for Leesburg Pike.
Padgett opened Archaio’s Leesburg office in neighboring Loudoun County, Va., in April. For the time being, it’s a one-man operation. “We’re very virtual,” he said. “Most California companies are.”
He added that the new office will help Archaio reach its goal of tripling revenue in 2010.
The company digitizes blueprints to create 3-D models of buildings. The models are used by security organizations and first responders to familiarize themselves with targeted facilities before they enter them.
Archaio initially viewed the Defense, Homeland Security and Justice departments as potential contract opportunities. One of the company's first wins was an unspecified large award from Justice to digitize about 1.4 million square feet in 16 critical infrastructure target buildings in Pima County, Ariz.
Padgett declined to provide contract details but said law enforcement special operations teams in the county were using the company’s digitized 3-D renderings to plan and rehearse various entry scenarios for buildings.
Salesforce opened a full-service office in Reston, Va., in spring 2007. “We started small, and we’re several times larger now,” Burton said.
“It has worked out extremely well,” he added. He declined to disclose precisely how many employees work in the Reston office.
Although the company established its footprint in Northern Virginia shortly before the current recession and election of President Barack Obama, “both of those in a way have accelerated the [government] market for us,” Burton said.
Salesforce’s growth has largely been fueled by work with several federal agencies, including the State and Health and Human Services departments, the Army, NASA, and the Census Bureau.
Eight of the 15 Cabinet-level agencies are now running Salesforce cloud computing applications, Burton said.
Transcontinental corporate moves to Northern Virginia are not new, Gordon said. The Fairfax County Economic Development Authority has had a presence in Silicon Valley for more than 25 years, marketing the advantages of the county whose major business center, Tysons Corner, is beginning a megabillion-dollar makeover.
“It’s a cyclical thing in a sense because we’ve had companies coming out of California for many, many years,” he said. During that time, interest in Fairfax and environs has waxed and waned, influenced by what Gordon called sporadic economic growth cycles.
Economic growth patterns are cyclical, Ostrow agreed. But the current downward cycle is expected to last longer than most because the widespread recession has affected virtually every industry, he added.
“Flat [growth] is now the new up" cycle,” he said. “So if you can have low growth, think about what that really means: That’s the new up-up" cycle.
Ostrow said the normal federal budget, which increases incrementally each year, “all of a sudden is extremely exciting, and it’s become much more of a target for companies.”
He said that target is the result of three factors: supplemental war funding, the Troubled Asset Relief Program and the stimulus law.
“There’s a new interest in Washington because of the potential to get access to some of the stimulus money,” Gordon said. “So we’re getting pretty good interest from California companies. Some [expansions] are in the pipeline now, some are in a wait-and-see mode, but they are all looking.”