The traditional methods of doing business are no longer delivering sustainable results. Agencies are under increasing pressure to leverage technology as a means to innovate their way out of budget deficits. Fiscal uncertainty is everywhere, often causing government decision makers to take a “wait-and-see” approach. Older initiatives, like the 25 Point Implementation Plan and Cloud First, are accompanied by PortfolioStat, Digital Government, as well as modifications to the Federal Data Center Consolidation objectives.
Impending cyber security and IT reform legislation intended to provide more accountability and oversight of IT at the CIO level are in the long, slow process of transforming government IT -- including its people, processes and technology consumption patterns.
For years, distributors, suppliers, VARs (Value Added Resellers) and SIs (System Integrators), have been continually challenged to find new paths to sustainable profitability and greater value in order to combat shrinking product margins. The key element in their strategies has been to shift from product-based sales to solution-based selling in order to find the higher margins and customer stickiness necessary to sustain profitability. Many are realizing this shift requires organizational change along with significant training.
Suppliers like Cisco, EMC, HP, IBM, NetApp and Oracle have partnered with Microsoft and VMware to drive integrated, virtualized solution-based selling. In the process they have replaced some of the value-added work typically done by VARs and SIs in their integration labs. The era of converged infrastructure is in full swing with Cisco/NetApp FlexPod, EMC VSPEX, HDS Unified Compute Platform (UCP), HP Converged System (BladeSystem Matrix and Moonshot), IBM PureFlex, and VCE Vblock – to name a few examples.
The outcome is a supplier-focused category of integrated infrastructure solutions that serve as a base for further solution development focused on defined applications, like Exchange, Oracle and SAP; or mission-oriented applications like NOAA STAR used for calibration and validation of satellite data. Here lies the problem: these transcend the traditional contracting models of having an individual contract for servers, a separate contract for storage, and a third contract for networks. How does the government contracting officer procure a converged solution? Additionally, how can VARs and suppliers, which traditionally focus on high volume product sales, compete in the solution-based market?
The Rate of Change is Increasing.
The rate of evolutionary and innovative technical change has increased. It is increasing faster than we can keep up, faster than we can manage and faster than we can understand the full impact, benefit, overall value and unintended consequences of technology decisions. The consumerization of technology, the efforts of The Office of Management and Budget and the Federal CIO, the potential of FITARA-like legislation and the ever-present threat of budget cuts create a wide mix of competing pressures that are impacting this market. Government IT operations teams are spending approximately 70 percent of their budget on operations and maintenance for a mix of legacy and modern infrastructure. This leaves little time or money for keeping up with and making sense out of the constantly changing technology landscape. If keeping up with technical change is problematic at best, how can they be expected to align technology decision making with budget, administrative and mission outcomes? How can they design technology projects that deliver targeted improvements to the infrastructure, processes or applications that help achieve desired outcomes? How can they create strategies to innovate their way out of budget constraints as directed by the 2014 budget?
Adapt to Change and Win.
Government agencies and technology companies that do business in the federal market must re-align their business and technical strategies to position themselves for these new realities. We all must come to understand that change is the new constant. The new challenge becomes how to create a sense of stability in a sea of change? This is equally true for everyone in this market -- the government, VARs, suppliers and distributors.