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RealTime IT News

Government a Gold Mine for IT Companies

Whether they're aware of it or not, the companies exhibiting at this week's FOSE 2002 government IT show -- the largest of its kind -- are tapping into what one research firm says is one of the largest areas of information-technology spending over the next several years.

Gartner Dataquest has identified the government sector -- combining both federal and state/local -- as the second-largest vertical in terms of IT expenditures. Government is second only to financial services, Gartner also said. Additionally, government is also the fastest-growing markets for spending on external services vendors.

By 2005, overall government IT spending at the federal and state/local levels will reach $108.8 billion, representing an average annual growth rate of 8 percent over the $84.7 billion expected to be paid out in 2002, Gartner said. The firm also predicts governments will spend $31.4 billion on professional and support services in 2002, rising to $48.1 billion in 2005 -- an annual growth rate of 15 percent, a number Gartner calls "the highest among all vertical markets."

Other recent studies back Gartner's figures. The Government Electronics and Information Technology Information Association (GEIA) said that the total federal IT budget for fiscal 2002 will increase 15 percent to $49 billion over fiscal 2001. By fiscal 2007, federal IT spending is expected to top $65 billion. Civilian and defense agencies will spend about the same amount of same amount of money in fiscal 2002, with $24.2 billion going to civil agencies and $25 billion to the Department of Defense (DoD).

"Government is really the only growth industry right now," said Rishi Sood, Gartner's principal analyst in the government sector. "In fact, we call government the 'new sexy industry' and the 'new dot-com.' It's the new area where vendors can turn to grow sustainable, repeatable revenue streams."

Putting Their Best Face Forward

Many companies wanting a chunk of that government dough were at the FOSE Conference and Expo, trying to attract government dollars. They had a lot of company -- FOSE officials expected attendance to break records, with more than 17,000 government and industry professionals expected to walk the floor of the Washington, D.C. Convention Center and interact with the over 400 companies demonstrating their wares in the areas homeland security, e-government, biometrics and IT infrastructure.

While many of the businesses there are "household names" in the IT world, many more were not. Zebra Technologies , for example, makes and sells on-demand printing products and software to both government and business. It provides thermal bar-code label and receipt printers, as well as card printers, supplies, label supplies and integration software. If you've rented a car and gotten a printed receipt from an attendant in a parking lot, you've seen one of Zebra's products in action.

Zebra's strategies seem to work, too. For a company that didn't even have a dedicated government sales force until about 3 years ago, revenues generated from such sales now contribute from 2.5% to 3% of total revenues -- figures that the company hopes to double in the next year, said Timothy McGilloway, Zebra's director of strategic accounts.

Hewlett-Packard Co. has also used the past couple of years to build a government solutions sales force, said HP General Manager of Federal Sales Bruce Klein. The company is seeing "double-digit growth" in its sales to government. In addition, public sector sales -- including federal, state and local, and education -- make up from 10 to 20 percent of HP's overall sales. HP sells everything from business and notebook PCs to printers to software to full-fledged networking products to the public sector.

Oracle Corp. , meantime, was founded 25 years ago as the result of Project Oracle, which resulted in the first commercial structured-query language (SQL) relational database management system. Today, Oracle develops solutions for both the private and public sector. It recently announced the opening of its Information Assurance Center, which educates customers on prevention, detection, crisis management and consequence management, and provide a test bed for leading-edge security, business continuity and disaster recovery solutions. Oracle hired former top CIA official David Carey to head the new center -- he's now vice president of information assurance for Oracle Service Industries. About 23 percent of Oracle's total revenue comes from various public-sector sources, including the federal government.

Even though all three of those companies are very different, they all gave the same advice for companies wanting to sell to government. Their advice parallels with much of what Gartner's Sood said as well.

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