IT budgets in the public sector have taken a beating since late 2010, with growth stalling due to defense cuts and budgetary turmoil throughout 2011. Several big vendors saw revenues decline, while a select handful adjusted their course in response to market conditions and managed to grow their top lines. TBR tracks 16 key players in this vertical on a quarterly basis, and our data and insight indicates that in 2011:
• IT services firms serving the public sector realigned portfolios to follow the budgetary reprioritizations in the federal government’s IT spending;
• Vendors were compelled to focus on margin performance in lieu of top-line growth through operational excellence and a focus on strong contract performance;
• Some companies are looking beyond their core market in the U.S., hoping to leverage their capabilities to gain traction with international government clients as well as new clients in the commercial sector.
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TBR Public Sector IT Spending Benchmark Report
1. PROFESSIONAL SERVICES BUSINESS QUARTERLYSM
The Challenging Federal Technology Market:
Insights from TBR’s Public Sector IT Services Benchmark
TBR Webinar Series
Spring 2012
Original Webinar Date: March 21, 2012
Presenter:
John Caucis, Public Sector Practice Manager (john.caucis@tbri.com)
TBR
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Notas del editor
Average revenue growth for the 20 firms in the Public Sector IT Services Benchmark was 0.8% in 2011, falling from 18.2% in 2010Average revenue growth for the 20 firms in the Public Sector IT Services Benchmark is estimated to be -2.2% in 4Q11, falling from 0.2% in 3Q11 and decelerating for the sixth straight quarter
Enhance business development processesInvestments in BDInternal: new/upgraded CRM systemsExternal: draw closer to customers, put more executive management in front of clients, anticipate client needs & spending trendsIncrease number of proposals submitted; focus on reducing customer costs, expediting timelines and improving efficienciesEnhance subcontractor relationships and collaboration with other vendors, bring the right team to the tableSmaller competitors (ManTech, CACI) focusing on winning more awards as prime contractorPortfolio reshaping to align with shifting federal spending prioritiesCybersecurity, C4ISR, Intelligence, IT Modernization, Data center consolidation, Cloud migration mapping, Logistics
Expansion into adjacent and parallel markets; diversify revenue basesDomestically: health IT, public safety, energy, commercial/state/local sectorsInternationally Showcasing solutions & cross-selling to foreign military customersBorder security, C4ISR, cyber, commercial sectorsTiming of awards difficult to predictLeverage acquisitions to enhance positioning and capabilities in areas that will receive continued funding prioritizationGeneral Dynamics/Vangent made the biggest “splash” in the health IT spaceManTech & CACI continue to execute aggressive M&A strategiesExpand alliance ecosystems to enhance offerings in areas where spending will be sustained or grow (e.g., cloud)CACI joining the Amazon Web Services programRaytheon NCS seeking SMB partners on SOCOM contracts
Reduce operational dragFacilities consolidation, reduce operational redundanciesConsolidation of IT infrastructureStreamline supply chains, improve existing internal SCM/ERP systemsExamples: Raytheon’s “supply-chain” initiative; Lockheed Martin’s voluntary headcount reductions to management & employee baseEnhance contract delivery and performanceEnsure repeat business & a high level of successful recompetesIncreasing employee utilization/productivityMinimize unprofitable activitiesDeemphasize or exit less profitable business lines, contracts and/or programs (e.g., Northrop exiting Nevada Test Site JV)Increased contract selectivity, avoid margin dilutive contractsShift portfolios out of low growth/margin areas to more stable and higher margin areas