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Emerging technologies alter the way agencies, industry do business
Tuesday - 11/19/2013, 1:00pm EST
At the same time, agencies are turning to industry more than ever to access emerging technologies like cloud, mobile and big data. New companies are popping up, and established contractors, big and small, are altering the way they do business to take advantage of emerging technologies and the way that technology is delivered.
Federal News Radio's special report, A New Era in Technology, examines the sea change that will force federal agencies and contractors to think differently as they learn how to master these new technologies together.
Federal News Radio teamed with Govini to analyze the government's IT spend over the last five years. According to Govini's analysis, spending on emerging technology grew from $717 million in 2009 to $839 million in 2013 — peaking at $968 million in 2012, the year before sequestration kicked in.
"The whole face of the technology industry is undergoing change on a constant basis," said Stan Soloway, president and CEO of the Professional Services Council. "What we really see is a slow but inexorable movement towards a consumption-based, or what some people refer to as a service environment, rather than owning infrastructure. It's a challenge in the private sector but even a bigger challenge for the government."
In the broad technology front, the rise of consumption-based models, with cloud being a perfect example, is changing the face of the industry .
For the purposes of this report, "emerging technologies" were defined as any contract under PSC Code 70 or PSC Code D that included keywords relevant to cyber, big data, cloud, mobility, health IT or energy IT. This chart shows the number of contracts (actions) and the amount of money spent on those contracts (spend) from 2009 to 2013.
"In the future, you won't have the numbers of people onsite with the customer because everything will be remote and virtualized and so forth," Soloway said. "And so, just the very way you go to market is changing and that changes pricing strategies, it changes bidding strategies and for both government and industry, there's still a lot to learn about how best to make that work best for the government. So, there are some very fundamental changes taking place on the industry side."
Jeff Rubenstein is the founder and president of SmartProcure, a Florida-based information service provider that aggregates purchasing data from across the U.S. on the local, state and federal level. It shares that data with government agencies and contractors so that they can better understand each others' needs.
Rubenstein's company has done extensive research on how the changes in IT have affected the federal government and contractors. SmartProcure has seen several trends occurring, one of which is a sense of comfortability developing at agencies when it comes to outsourcing.
"In terms of IT especially, you're finding a bigger trend toward comfortability in sending out either their data and/or projects to be done externally versus internally," he said. "HealthCare.gov may be contrary to that, but there has been a lot of comfortablity with going to a GoogleApps-type platform sales force. You're seeing a lot of those type of companies be more successful in the government market."
One of the struggles from a small business standpoint, though, is establishing credibility.
"We're seeing a lot of new companies show up to solve needs, either with the government agency — what they're doing internally — or to solve a need that isn't being solved by them or one of these large, outsource providers," Rubenstein said.
He pointed to ArchiveSocial as an example of a small IT company that is working with agencies to archive their social media.
"These government agencies have gotten comfortable sending out tweets and posting things on Facebook, but, in order to maintain proper record keeping, they didn't have a mechanism to do that," Rubenstein said.
ArchiveSocial helps agencies keep proper records in order to comply with Freedom of Information Act requirements.
"So, in conjunction with what they're comfortable doing with a large company like a Twitter or Facebook, these smaller companies are adding services that either fill a legal need or potentially a social need or another need the government agency might have," Rubenstein said.
Agencies turn to the commercial marketplace for help
With constrained budgets, agencies are having a harder time finding talent in-house, so looking to the contractor community to provide support in the IT realm is natural.
"There's clearly a movement towards the cloud," Rubenstein said. "Also, technology is getting faster and getting more advanced, where it's hard to keep the best skill sets within a government agency. Outsourcing it, in many cases, is the only type of option they have in order to deploy a certain service or to manage a certain service."
Rubenstein's company is seeing the greatest demand from an IT perspective in the data and cybersecurity areas.
"There's a huge movement to open data, a lot of data that's being generated from tools that are out there now, data gathering mechanisms they have in place and they want to track and analyze, " he said. "I think they're seeing success, both private businesses and the federal government are seeing success analyzing some of this big data that they have. Along with that obviously comes the cybersecurity aspect, whatever data that shouldn't be in the public eye is secure and managing all that technology that they'll deploy in house."
Mark Weber, president for the U.S. public sector at NetApp, a storage and data management company that is one of the top storage providers for the federal government, said that the technology in the digital storage world has undergone a drastic change.
"There are all kinds of things that we focus on which allow you to store your data way more efficiently," he said, of the services his company provides the government. "So, you don't just look at, 'I'm going to buy another 10 terabytes.' Agencies are also looking at, 'How efficiently I store that data,' because some of the technology that we have and other companies as well, can clone that data and provision it different ways, can backup and compress it differently. So, the technology is playing a big role on who can store more data on the disk drives and who can find it and retrieve it and have it more secure."
A shift in how new technologies are delivered
At the same time, the way those technologies are delivered to agencies is changing. It used to be an agency's CIO and staff would figure out what problem needed to be solved, go out into the marketplace, identify what products offered the best solutions, purchase those products, stand them up, integrate them and deploy them. With fewer capital dollars coupled with advancements in on-demand applications over the last few years, agencies have started changing the way they're integrating technology.
"Now, the CIO is not just looking for product, they're also now more of a broker," Weber said. "They're out there saying, "Hmm, maybe I'll get my storage from this guy, who offers it on demand. Or, I'll get my email from this company, who will provide it by the mailbox rather than buy an email application, buy a server or storage, buy the whole stack and build it yourself.' Acquisition strategies have changed drastically, not just the technology."
One of the biggest changes in technology is in converged infrastructures.
"Before you would go out and procure your network from a networking company, a CISCO, a Juniper, something like that, you'd go get your servers from somebody else. ... Now, what we're doing is we're teaming with those companies and pre-integrating those products, so we've gone to CISCO and VMWare and the server companies and integrated our product, tested and validated it prior to you buying it," Weber said. "Before, you'd buy it from five different companies and you would show up and take it out of the box, integrate it and try to stand it up. We're doing that before it gets there. So, you can buy the best of breed products from those separate companies and it's already validated and tested."
The rise of converged infrastructures may appear to some to signal the decline of the role of the systems integrator, but that may not be the case.
"The old version of the old systems integrators, are they morphing their business models incredibly fast?" Weber asked. "You bet. If they don't, they're going to lose most of their business. You see a lot of them moving pretty quick and some of them not moving so quick, so that just means that they won't win more business."
On the other hand, when you're doing more agile, incremental development, there may be less of a need for a systems integrator role in the classic sense.
"But you also always have to have a systems engineering and systems integration capacity, because at the end of the day that's what you're doing is integrating systems," Soloway said. "And whether you do it internally or externally, what kind of skills and what it looks like, how it manifests itself may be different, but that basic skill is not going to go away, because you're not going to have a system that lives in such isolation it doesn't require any integration."
New companies emerge, established companies change their approach
But who are the companies coming forward to provide these new services based off of emerging technologies?
Because the federal IT market is so huge, Weber said, you'll always see new companies spring up to address specific needs spawned by new technology and you'll see older, more established companies alter the way they do business to address a client requirement.
"You're always going to see both," Weber said. "It doesn't matter if they're spending less money next year, it's still a huge IT market."
Soloway agreed. "You clearly have new players in the market," he said. "Who would've thought Amazon would be a player in this market five years ago? It would not have occurred to any of us. So yes, we clearly have new players. It remains true for companies that are not very large with fairly good resources, like an Amazon, that getting into this market for a small commercial company is a very cost-prohibitive endeavor. The barriers to entry are significant still. So, there's still that challenge."
Roger Waldron, president of the Coalition for Government Procurement, said there would always be a place for the traditional government contractors.
"There should be a greater place for commercial item contracting, because even the traditional government contractors can utilize a commercial item process to streamline their operations and provide better value as well," he said.
Waldron's concern with this approach is that the "commercial" element needs to be put back into commercial item contracting.
"The government needs to emphasize reducing barriers to access to the federal marketplace to adopting more commercial practices, reducing government-unique requirements that are inconsistent with the commercial marketplace. That way, you can leverege what's already going on out there," he said.
Waldron remembers working on major federal procurement projects in the 1990s that took years to award. The day after the award was made, the government would be substituting technology that was proposed with the latest technology because over the long procurement process, the technology had changed.
"The irony there is that the award was based on technology that the government's never going to actually use," he said. "They're going to use later technology. There's still some of that today, frankly, and that's when I go back to the commercial item and item acquisitions and articulating requirements. It's a powerful combination if you're able to clearly articulate what you need or do a performance-based approach and do it under a streamlined manner using commercial-item processes to get what you need in real time."
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