Companies selling technology solutions to the government are facing flat spending, lower margins, new acquisition methods, limited resources, and increasing competition. In 2013, a PulsePollTM from Market Connections, Inc. and Lohfeld Consulting Group revealed almost half of contractors (45 percent) were re-architecting by expanding into adjacent markets in response to government market pressures. To address the continued challenges that surround the market, immixGroup is hosting the Government IT Sales SummitNovember 20, 2014 in McLean, Virginia.
The 2008 recession and sequestration hit state and local governments hard, and much IT acquisition came to a halt. Over the last few years, however, state and local governments have increasingly invested more than the federal government—they spent $95 billion on IT in fiscal year 2014, with steady year-over-year growth expected. Contractors understand this is a good market—the PulsePoll showed that contractors are looking to it for expansion with 48 percent pursuing it in 2013 versus 29 percent in 2012.
Guran Green, immixGroup VP of Corporate Development, is conducting a session at the summit on how contractors can tap into the state and local market. FedPulse had the opportunity to speak with him about some of the trends in state and local procurement and what contractors can start doing now to reach these customers.
FedPulse: What trends are you seeing in the state and local government market?
Green: In addition to the fact that IT spending is up in the state and local market (where it has been flat in the federal market), there are three major trends driving IT acquisition today.
- As in the federal market, from a technology perspective, cybersecurity is a hot category across all 50 states. State and local governments manage health records and other personal data. Security is critical.
- State and local governments are interested in disruptive technologies. CIOs are looking for new and emerging technologies that have cost savings. They are more inclined to try something new without the proof cases that the federal government often needs. For example, cloud computing is a disruption to the old way of doing things, but it not only drives cost reductions, it provides some insulation against future budget constraints—making it very attractive to CIOs.
- A priority for all state CIOs is their acquisition strategy. The recession and budget cuts caused a halt in new technology acquisition. As a result, overall performance and workflow was compromised. CIOs want to correct that, and they want to do it in a strategic, cost-effective manner.
FedPulse: What do you see the growth opportunities to be?
Green: The three primary growth opportunities are cybersecurity, mobility, and modernization. These are all great opportunities for technology companies.
FedPulse: How does the state and local market differ from the federal market? What do companies entering this market need to consider?
In terms of differences, contractors need to understand that the states are more decentralized. This means each state fulfills its mission independently. While CIOs do talk to each other, at the end of the day there is no unity to how they acquire products and services. And the decision makers are often different than in the federal space.
In addition, ecosystem partners are different. In the federal sector you have GWACs (Government-wide Acquisition Contracts), but every state and local government has its own IT procurement vehicles and established relationships with local vendors. Contractors need to know who those local people are and develop teaming relationships with them—working with a partner in Pennsylvania won’t help on a procurement in California.
That may make it seem like going after state and local business is difficult. But when considering the similarities, tapping into this market makes sense.
State and local governments face the same challenges as their federal counterparts. They need to deliver on their mission. If contractors can figure out how to translate solutions to the specific requirements of the state or local government agency, they can get scale from investments they’ve already made.
And despite the fact that spending is up, budgets are still tight in state and local governments. CIOs are looking for solutions that are cost-effective—and will continue to be so in the future. How companies position their value becomes a similar conversation.
FedPulse: How can IT companies position themselves to take advantage of this growth and these opportunities?
There are many great opportunities for technology companies right now, and now is the time to take advantage of everything happening in the state and local government market. Doing so boils down to one primary thing: understand who you are selling to in this market.
To do this, the first thing a company needs to do is develop a focused go-to-market strategy for state and local government. We often see that state and local falls under a company’s commercial line of business. But it really doesn’t fit there—there are different drivers, procurement processes, ecosystem partners and value adds.
Companies also need to be familiar with the seven major segments of state and local government (listed below with FY14 IT spend). Each has different acquisition drivers, and it’s critical to understand what those are and determine how to position offerings around them.
|State and Local Government Segments||FY14 IT Spend (billions)|
|Health and Human Services||$23.1|
|Administration & Finance||$11.9|
|Source: immixGroup Market Intelligence Group|
FedPulse: What can attendees expect to learn in your session at the summit?
My session at the Government IT Sales Summit is called “A More Perfect Union: Tapping the State and Local Market.” I’m sharing the stage with Mark Boyer, former CIO of the State of Alaska, and Joseph Morris, Director of Market Intelligence for eRepublic’s Center for Digital Government. In the session, we’ll delve deeper into how federal dollars are appropriated to the states, how to tweak a federal go-to-market strategy to achieve success at the state level, and how current IT acquisition trends may affect sales in this growing market. Our goal is to make sure sales and marketing people leave with a better understanding of how to pursue and win more business at the state and local level.
We would like to thank Guran for taking the time to speak with FedPulse. Register for the Government IT Sales Summit.