Carriers, resellers and service
providers may have services and solutions that public sector entities (read: the government) want and could use, but being successful in this vertical takes a lot more than a fitting solution. With a unique set of purchasing requirements and pain points, state, local and federal entities are time-consuming, yet ultimately worthwhile, customer targets.
But to win their business, a company really has to make understanding the vertical a top focus. It’s almost like joining a club.
“The No. 1 strategy we encourage is to dedicate resources to the selling effort,” says Justin Nelson, director of channels for Avaya Inc.’s public sector business. “This is not like the commercial market where you can sell different companies the same solution. The public sector customer doesn’t have time to be called on by someone who doesn’t understand their space indepth. If you’re a hybrid reseller that does commercial and public sector work, it’s difficult to be successful.”
While it may seem limiting, dedication to being part of the public sector club could pay off. After a long dry spell, players say money is beginning to loosen up in the government coffers. “I’m hearing at tabletop shows that the money’s starting to break free,” says Woody Story, head of government reseller Choicecomm.
In-Stat/MDR expects the vertical to support roughly 64,000 government agencies by the end of the year, about 1,000 more than estimated in 2003.
Aside from the overall size of the opportunity, Frost & Sullivan reports that state and local clients especially are looking to the telecom community, which has resulted in an opportunity for carriers to target specific services and expand the public sector. While the arena has suffered from a “decline in tax revenue, major budget deficits and major shifts in project priorities,” technology continues to be a major component in purchasing plans for entities looking to improve citizen services and agency communications, says the firm.
THE BUYING PROCESS
Getting in front of these customers is the beginning of a process that may take years. While many government contractors can make huge amounts of money, getting to that point is a multistep journey.
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A carrier, reseller or channel partner must first find the appropriate contract vehicle or purchasing agent. The U.S. General Services Administration (GSA) is the best-known. GSA is the federal government’s buyer, offering contracts for billions of dollars worth of IT equipment and network services. GSA advertises locally and nationally, and opportunities of greater than $25,000 in value are advertised on www.fedbizopps.gov. Vendors can register to receive e-mail notification of opportunities.
GSA has special programs for small businesses, small disadvantaged, women and minority-owned businesses, Historically Underutilized Business Zone (HUBZone) companies, and veteran and service-disabled veteranowned businesses. It has established goals for awarding contracts to these businesses, and some small business programs also have ‘set asides’ under which certain contracts are reserved for competition among small or small disadvantaged businesses.
There also are Indefinite Delivery, Indefinite Quantity (IDIQ) contracts, under which government agencies can order services through preawarded contract vehicles at pre-determined fixed-price labor hour rates.
Some IDIQ vehicles are Government-Wide Acquisition Contracts (GWACs) and can be used by any government agency; others may be restricted to specific departments.
Other contract vehicles exist; there are specific buyers for local entities, branches of the Armed Forces, certain agencies and in every state. Finding the best route in takes research. “You really need to take part in conferences and user groups, read the trade magazines-thats how you find the key issues and vehicles,” says Nelson.
Once an appropriate contract is identified, a company has to write a proposal in response to the RFP attached to the opportunity. “It’s a difficult process,” says Ernie Hutchins, director of marketing and sales at Lynx Photonic Networks. “You have to answer all the questions, send it in and wait and see. If you make the smallest mistake, you can be dropped right out, and you never hear why.”
The evaluation process is lengthy as well. “The sales cycles are really long,” explains Story, “because they really research the market and test solutions and weigh the alternatives. They don’t make any snap decisions.”
Once a contract has been awarded, there’s an additional hurdle: funding.
While some agencies have a fund where project money rolls over from one year to the next, the money generally has to be written into the budget every year, even if the project is ongoing.
“If the evaluation was made in the June timeframe, likely the money won’t be allocated until after the end of the fiscal year, which is Sept. 30,” says Story. “And once it’s allocated, you may not even see it until the end of the first or second quarter of the following calendar year. And that’s a smaller project.”
“The large scale of these opportunities is a mixed blessing,” says Stuart Layzell, COO at Defywire Inc., a wireless middleware provider. “The numbers are huge - a $100 million engagement is not atypical. So, of course, you expend all your resources to chase this, but your company’s dead if you don’t get it. You have to watch how much you’re investing.”
The process may seem daunting, but there are back-door ways in during the implementation by partnering. For instance, companies can partner with a vendor that has an existing ‘schedule’ with the GSA. Having a GSA schedule means products and services are listed in a catalog of approved items, so a federal agency can purchase them without issuing a request for proposal and initiating a lengthy bidding process. Comstor Inc., a value-added distributor, has a GSA schedule for networking and Internet connectivity hardware, software and training. In turn, Comstor can authorize its VARs to represent the schedule to federal end users.
Distributor Voda One Corp. offers Federal Edge, a comprehensive valueadded support program for Voda One BusinessPartners looking at the government marketplace. The program provides government market information, lead-generation programs, technology solutions, and sales and marketing support to its VARs, along with access to vendor GSA schedules.
Top Telecom and IT Opportunities in State/Local Government
Source: Frost & Sullivan 2004
Also, many telcos and service providers cultivate relationships with systems integrators such as SAIC or EDS. Typically, the government hires a contractor or systems integrator to implement a project, and the contractor or SI in turn pays the approved vendors. The SI also can bring in additional products and services to fulfill the project mandates, so a company essentially is selling to the integrator.
“We partner with large systems integrators or independent software vendors already serving the government,” says Layzell. “We take a broadbased approach because each agency may have a roster of SIs they like to work with.” Similarly, Story often partners with general contractors by turning over leads. In return, the contractor buys the equipment from Story for bringing it the business.
END USER CONCERNS
While the contract, bidding, funding and implementation process is a well-codified procedure with seemingly no marketing component, there is nonetheless an imperative for generating end-user demand - to spark the RFP in the first place.
“You want to generate end-user demand,” explains Avaya’s Nelson. “They have X number of capex dollars per year, and it’s earmarked for certain solutions. You’re not going to be able to talk them into shifting that funding from upgrading PCs to IP telephony once it’s allocated.”
He adds, “Talk to the cabinet and the civil service people, to make them aware. The further down from the Fed you go, the easier it is. On the local level you can certainly forge a good relationship.” He notes the person writing the RFP is usually a civil service person, while the spending decision is made by elected officials, in response to an even higher level of elected official determining strategies or initiatives. Then the projects are carried out by an “army of bureaucrats.”
Specific areas of interest in the public sector include interoperability and interagency communication, homeland security/business continuity and mobility. Knowing this isn’t enough, however. “The buying concerns are different from the commercial space,” explains Nelson. “Logically, there’s no revenue expectation. In the business world, you buy to improve the top-line revenue growth and improve the bottom line. There is no top line in the government - it’s all tax dollars.”
He says the ability to serve those taxpayers better is a large driver. “It’s constituent service - the ability to reach elected officials when you need to or to allow schools to proactively contact families about snow days. Elected people know it’s how well they serve people that has put them in the job to begin with.”
A second major driver is efficiency. “If you’re the Department of Motor Vehicles and you don’t have intelligent routing, you’re giving out busy signals,” says Nelson. “By networking the call centers together and balancing the load, you improve efficiency, their form of the bottom line.”
Some service providers are crafting solutions just for the public sector.
AT&T Corp. has introduced an MPLS, network-based IP VPN for U.S. government agencies. It allows them to run their networks and applications like intranets, e-mail and extranets on an all-IP network, but securely separated from public Internet traffic. The carrier also recently won a five-year, $7.5 million contract with New Jersey Transit to enable faster, easier access to information about bus and train arrival and departure times, fares and routes.
AT&T is upgrading N.J. Transit’s administrative and operational networks with an extensive portfolio that includes local, long-distance, international and toll-free voice services; and frame relay and private-line data services.
Pixion Inc. has partnered with Wave Three Software for conferencing and collaboration tools for both Apple and PC computers. “Government agencies that have a large Mac base will find this helpful in their program collaboration with other government agencies, universities, and the agencies of foreign governments,” says David Budd, vice president of sales and business development at Pixion. “Aerodynamic tests, flight simulation data, and computer modeling can all be shared - in real time - across the Web, from desktop to desktop.”
Defywire is using its wireless software platform to build applications for extending the desktop to mobile devices. “We’re building various applications targeted to the government and we’ve seen 12 months to 18 months of increasing awareness and demand for mobility,” says Layzell. “It’s driven by Homeland Security and 9/11, unfortunately, initiatives to ensure communication for first responders and in every level of agency, the ability to communicate with workers in the event something happens.”
Lynx offers protection switching, a device that monitors fiber optic cables to ensure no one is listening in. “A lot of people think optical fiber is very secure,” says Hutchins. “But we take a device bought off the Internet, enter the casing and bend the fiber. Some of the wavelength just peels off onto this device, and you’re in. That’s a problem for electrical generating plants and nuclear facilities.” The Lynx device detects the break-in, identifies the location within two meters, and instantly switches traffic over to another route.
Crafting solutions to the need before a contract is in place could be a good strategy. “By creating specific products and services targeted to state and local government end-users and government applications, carriers can create higher profit-margin products and at the same time provide more valuable solutions,” says Stephanie Atkinson, program leader for Frost & Sullivan’s business telecom services and vertical markets services.
One caveat: “A service provider will have to have a high degree of standardization to be successful,” says Layzell. “The government is looking for off-the-shelf solutions because they learned their lesson on proprietary systems. They are riddled with silos of information that can’t talk to each other.”
AT&T Corp. www.att.com