When it comes to information technology sales to state and local governments ... These firms are IT

Information technology (IT) is one of the hottest product categories for government entities, and no one is doing brisker IT business at the local and state levels than IBM, Dell and Electronic Data Systems (EDS).

According to Reston, Va.-based INPUT, which analyzed state- and local-government IT purchases and contract actions dating back to 2001, state and local governments are spending heavily with firms such as IBM, Dell and EDS to upgrade their IT software and infrastructure. Government entities also are spending money with Affiliated Computer Services (ACS) and Northrop Grumman, which round out INPUT’s list of the top five IT sales leaders (see breakout below for a list of the top 10 IT sales leaders).

Michael Balsam, vice president of products and services for Seattle-based Onvia Inc., which tracks government purchasing and contract activity, noted that the IT telecommunications market is growing at a 20 percent rate, making it the fastest-growing area of state- and local-government contract activity.

“About 28 percent of IT projects are computer-hardware focused, suggesting major agency investments in IT infrastructure,” Balsam said. “This data may serve as a leading indicator for software upgrades and consulting opportunities across state and local governments.”

According to the Onvia Dominion database of government contract information, IT and telecommunications accounted for 8 percent of state- and local-government purchasing transactions over the past 12 months.

Proceed with care

The list of the top 10 IT vendors includes some familiar names. But even among these established technology giants, new alliances and combinations are being created, and public purchasers need to have safeguards in their procurement documents, cautioned Charlie Sasser, director of the Georgia Technology Authority, which oversees telephone, wireless and data services to agencies in every Georgia county, state colleges and universities, and 1,200 local-government and school-system offices.

“In the IT industry, there’s a lot of vendor consolidation going on, so when governments buy a technology—especially something current like Voice over Internet Protocol (also called VoIP) or whatever’s coming down the road next—you want to make sure that your contract language will protect your agency in the case that the vendor is either bought by a competitor or absorbed through a merger—any change of that nature,” Sasser said.

With change being a constant, SAP’s Russ LeFevre suggests that public purchasers proceed with care. LeFevre is director, public sector, at SAP, which offers a “Procurement for Public Sector” software package.

“If your government is looking to invest in solutions to support the procurement and contract management processes, I wouldn’t recommend going with a solution that is dependent on a particular technology, operating system or database—I think being neutral is important,” LeFevre said.

A shift toward open-source software

Among the trends that experts have observed in the government IT marketplace: A steady stream of government entities are shifting IT applications to open-source software—and away from proprietary packages.

“Most government purchasing applications are integrated with the ERP (enterprise resource planning) system,” said Paul Smith, vice president of government sales operations for Red Hat. “Sourcing, bid tab, requisitioning, etc., are usually part of a process work flow in the larger ERP. We are now seeing customers deploy their ERP suites (SAP, Oracle, PeopleSoft) on Red Hat Enterprise Linux, like the state of Tennessee recently did.”

The cities of Chicago and Bloomington, Ind., have opted for open-source solutions. Virginia’s state government uses open source in both its Department of Juvenile Justice and in its retirement systems. Federal agencies are adopting open-source software for space flights and military operations.

Experts also expect an uptick in telecommunications upgrades.

“Government IT clients are more interested in flexible networking technologies,” said Ken Fitzpatrick, senior vice president at Time Warner Cable Business Class. This interest in flexible networking technologies, Fitzpatrick added, ties into the ever-increasing need for high bandwidth.

Fitzpatrick has observed “a growing migration away from traditional time-division multiplexing (TDM) circuits—such as T1s—and towards Internet protocol-enabled virtual private networks (IPVPNs) using higher bandwidth broadband.”

“This technology has the benefit of reducing costs, improving bandwidth and supporting both voice and data,” Fitzpatrick asserted.

A closer look at the top IT vendors

1. International Business Machines Corp. (IBM), Armonk, N.Y.— IBM is tops globally in selling computer products and services, as well as a leader in software sales (ranking second, behind Microsoft).
According to IBM, the company is helping governments innovate in several areas, including:

• Improving the delivery of and accountability for government social service programs.
  
• Increasing government efficiency and effectiveness.
  
• Enhancing security, so that governments can collaborate to prepare for natural and manmade disasters and events.
  

IBM recently created tools for the Syracuse (N.Y.) City School District to help the district tailor teaching approaches to student learning styles. The company deployed wireless and broadband communications across 35 sites to provide a versatile platform for teaching innovations and to help make teachers more responsive to students.

2. Dell Inc., Round Rock, Texas—Dell is the world leader in direct-to-customer sales of computer and related products. Besides desktop and notebook PCs, Dell offers network servers, workstations, storage systems, printers and third-party software.

Dell, in partnership with First Mobile Technologies, recently outfitted vehicles in the Broward County Sheriff’s Office (Ft. Lauderdale, Fla.) with Dell Latitude D-series notebooks on customized vehicle mounting units and docking stations. Most deputy vehicles in the sheriff’s fleet now have been standardized to Dell notebooks.

3. Electronic Data Systems (EDS), Plano, Texas—EDS founded the information technology outsourcing industry more than 40 years ago. As the largest independent systems management and services firm in the United States, EDS works with many local and state governments in homeland security, IT outsourcing and health and family services. Challenges that many of these agencies are dealing with include aging technology, new public safety requirements and increased administrative burdens.

EDS will provide security services—such as managing firewalls and anti-virus programs—to federal agencies as a subcontractor to AT&T Government Solutions. This comprises one of three Networx Universal contracts that the U.S. General Services Administration recently awarded.

4. Affiliated Computer Services (ACS), Dallas, Texas—Local governments on both coasts rely on ACS’ outsourcing and technology-related services. ACS, for instance, provides parking ticket collections, booting and towing and fleet management services for Boston’s city government. ACS has served the city since 1981.

In Orange, Calif., ACS is providing a range of IT services to the city, including: enhanced network security systems; online payment processing of utility bills; online employee application tracking; and disaster recovery.
ACS also is developing a self-serve book checkout system for the city’s newly remodeled main library.

5. Northrop Grumman Corp., Los Angeles—Besides being the world’s largest shipbuilder and a top-three defense contractor, Northrop Grumman has delivered a variety of IT offerings, including managed network installations, public safety systems and secure wireless to governments around the United States for more than 30 years.

“State and local governments are seeking innovative ways to use IT to transform their agencies in order to more efficiently manage costs, improve services to the citizen and enhance performance of their core mission,” said Jon Korin, vice president of strategic development for Northrop Grumman Information Technology.

A few areas of expansion that Korin expects in 2008 among local and state governments are: IT infrastructure transformation; public safety/emergency management; secure interoperable communications; and health and human services.

6. Deloitte and Touche USA, New York City—Deloitte delivers services in four professional areas, including audit, tax, consulting and financial advisory services.

In the IT arena, Deloitte has worked with many state governments on technology integration, enterprise transformation, strategy and operations, and outsourcing. For the public sector, Deloitte has analyzed the benefits of public-private partnerships and conducted risk management services for major public works construction projects.

7. Unisys, Blue Bell, Pa.—A world leader in IT consulting, Unisys provides systems integration, network engineering, project management and technical support services to governments globally.

Unisys has been working with Los Angeles County on the LEADER (Los Angeles Eligibility, Automated Determination, Evaluation and Reporting) contract. LEADER provides an online, real-time method for determining eligibility and benefits for the county Department of Public Social Services’ assistance programs. According to Unisys, LEADER supports more than 11,000 users, processing an average of 5.5 million transactions daily—98 percent of which are handled in three seconds or less.

8. Lockheed Martin, Bethesda, Md.—Besides being the world’s No. 1 defense contractor and developer of aircraft such the F-16 and F-22 fighters, Lockheed Martin supports the public sector through its work on homeland security systems, postal automation and e-government.

Lockheed Martin is developing an archival solution that will enable preservation of any government e-record for the National Archives and Records Administration, using any software application, running on any platform.

9. CGI Group, Fairfax, Va.—Since its founding in 1976, CGI has evolved into a leading IT and business-process services provider. “With clear goals and the right tools, procurement operations create strategic and sustainable value to the bottom line,” said Gary Lambert, a CGI vice president.

According to Lambert, a prime example can be found in Virginia, where “our Web-based government-to-business eProcurement solution manages the purchasing needs of over 300 state agencies and institutions, school districts, airports, authorities and commissions in a single system.

“More than 32,000 vendors have one standard way to do business with the commonwealth, while saving taxpayers over $40 million annually,” Lambert said.

10. Maximus Inc., Reston, Va.—One of Maximus’ main activities is providing outsourced program management and administrative services to government agencies responsible for health and human services functions. The company, which has a 32-year history of working for government agencies at all levels, also offers systems integration services to court systems and other government entities.

The health care field will be a busy area for Maximus and its government customers in 2008.

“E-health and the like will be key focuses within states,” said Rachael Rowland, vice president of government and public relations at Maximus. “Also, we see good potential in helping states with waste, fraud and abuse—particularly in Medicaid."