Federal Government: The Road Ahead

1. Federal Government:The Road Ahead Rishi Sood Vice President, Government Gartner rishi.sood@gartner.com

2. Presentation Outline • Market Environment • Baseline: Segmentation, Fast Facts, Procurement • Market Issues: Growth, War, Deficits, Instability • Federal: Key Market Issues & Trends • User Data: Major Business Objectives • User Data: Key Technology Priorities • User Data: New vs. Enhancement Development • Federal Opportunity Triangles • Market Forecasts • Total Federal IT Spending, 2005-2007 • Partnering Issues • Partnering Drivers • Key Areas For Partnering • Conclusions

3. Market Segmentation: Federal Executive-Level Agencies Defense Intel Civil

4. Size: Government is the second-largest vertical market in the United States in terms of total IT spending. Growth: During the past three years, federal government represents one of the fastest growing vertical markets. Change: Aging workforce, new mandates and evolving technology choices are rapidly reshaping the opportunity landscape for vendors. Fast Fact: Government Is...

5. Golden Rule No. 1: Relationship-Based Industry Golden Rule No. 2: Public Sector Sensibilities Golden Rule No. 3: Follow the Money Trail The Golden Rules of Government

6. Gartner Impact Gartner Impact Influence Strategy Influence Requirements Gartner Impact Ballgame Over Gartner Impact Gartner Impact Government Acquisition Process: Preparation Is Job No. 1 Present Findings to Procurement Officer and Political Body Needs Identification & Research Submit Recommendations to Agency Director New IT Project Develop Specifications and Bid Final Approval With Agency Director, Purchasing and Political Body Advertise Opportunity and Solicit Proposals Submit Vendor Recommendation to Agency Director, Purchasing and Political Body Evaluate Vendor Proposals Receive Vendor Proposals Within Procurement Rules Select Vendor(s)

7. Federal: Then and Now Now Then • Vendors discuss high double digit growth rates • Bush 2006 budget request includes 7% IT growth • Congress actively resizing budgetary growth • Vendors increasingly talking about stealing market share, rather than sharing an ever growing pie • M&A activity on the uptick • M&A activity on the uptick • State & Local budgets are mired in a sea of red • SLG Revenues outpace forecasts & CA finds $5B in new monies

8. Federal: Priority of Major Business Objectives Question: What is the level of priority for each of these business issues for your organization (scale 1-7, with 7 = highest priority, 1 = lowest priority)? Outsource Noncore Processes 4.6 Reduce Operational Costs 5.8 Program Accountability 5.8 Increase Collaboration 6.2 Enterprise Focus 6.6 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0

9. Federal: Key Technology Priorities Question: What are the most important technology priorities for your organization (7 = most important, 1 = least important)? Open Source 4.0 RFID 4.4 Business Intelligence 4.4 Wireless 4.5 Biometrics 4.8 Smart Cards 4.8 CRM 5.0 Knowledge Management 5.4 ERP 6.0 Security 6.6 0 1 2 3 4 5 6 7

10. Federal: New vs. Enhancement Question: Are your top technology priorities focused mainly on new development or modernization/enhancement of existing systems? Both 15% New Developments 20% Existing Modernization 60% 0% 20% 40% 60% 80% 100%

11. Defense • Focus on War • Net-Centric Principles • Application Modernization Homeland Security Intel • Enterprise Applications • Infrastructure Transformation • Information Sharing • NID Leadership • Control Over Budget Authority • Case Modernization Federal: Nat. Security Opportunity Triangle

12. Defense • Largest Healthcare org. • CHCS II • Clinical Data Repository Veterans’ Affairs HHS • Health IT Sharing Program • Joint Electronic Health Records Interoperability • HealthE-Vet • Federal Health Architecture • National Health IT Coordination • Medical Internet Federal: Healthcare Opportunity Triangle

13. Customer Centric • Call Centers • Increase customer outreach • 1-800-Medicare Process Specific • Defined agency requirements • Improve functional efficiency • Student Loan Administration Federal: BPO Opportunity Triangle Enterprise Focused • Discrete/Full Service Payroll/HR • Standardize platforms • Emerging areas of focus

14. Evolving Procurement Issues • Consolidation and establishment of new procurement vehicles • GSA Reorganization and Integrated Tech Services • New enterprise programs (eg SmartBuy) • Increase of performance based contracts • Increasing focus on baseline certifications (eg CMMI) • Greater/wider participation of 8A oriented organizations

15. Federal Government: Total IT Spend In U.S.$ billions Source: Gartner Dataquest

16. DOD-Focused Firms Global Firms Network/Telco Firms Midsize Integrators New Market Entrants Federal: Vendor Landscape Tier I Integrators OEMs Federal Government VARs

17. Solution Providers Control Large Bids Access to Senior Decision Makers Leverage Procurement Vehicles Federal: Why Partner?

18. Partnering Recommendations:What Each Side Wants From You Solution Providers IT Vendors • Tie Partnering to Tangible Opportunities • Identify Key Agencies and Highlight Major Federal Themes • Focus, Focus, Focus • Assign Single Point of Contact • Promote Repeatable Strategies • Encourage Executive-Level Partnerships

19. Biometrics Network/ Comm. Remote Monitoring Identity Mgmt. Sensor Networks VOIP Logistics Mgmt. Open Source Partnering: Emerging Areas

20. CXO Messaging Map Title Key Business Issues Technology Trends • Transition non-governmental work to the private sector • Invest in DOD, Homeland, and Intel business processes • War on Terrorism • Economic Acceleration • Customer Centric Government President and Congress • Align goals with PMA/OMB objectives • Apps that improve on operational efficiency and may reduce costs • Align agencies for integrated applications Agency Director • Core mission and program activities • Operational and business process redesign • Understand commercial best practices and use of COTS software • Implementation of horizontal technologies (ERP, CRM, Logistics, KM) • Infrastructure modernization • Internal Skills Shortage • Decrease the number of siloed and legacy systems • Create business case for new technology implementation CIO

21. Federal: Key Influencers Map University Research Technology Reforms • Harvard-Kennedy School • Brown University • University of Michigan • Purdue University • Government Performance & Results Act • Federal Acquisition Streamlining Act • Clinger-Cohen (ITMRA) • Federal Activities Inventory Reform Act • Federal Acquisition Reform Act • A-76 Govt. Organizations Government Decision Makers • Office of Management & Budget • General Services Administration • General Accounting Office • Technology Councils Publications • Business Commerce Daily • Federal Computer Week • Governing • Government Executive • Government Computer News • Washington Technology Research Firms Industry Conferences • Federal Sources • Forrester • Gartner • IDC Corp. • Input • FOSE • Gartner Symposium • Gartner Gov. Solutions Summit

22. 2005: Mid-Year Assessment Spending Views • STV: Transition to Moderate Growth of 5 Percent to 7 Percent • LTV: Budget Pressure Forces Growth of Less Than 3 Percent Key Technology Areas • Agency Modernization Expertise • Net-Centric Warfare • Network/Telecommunications Modernization • Intel Transformation • Growing: ERP, Logistics, Biometrics • Emerging: Sensor and VOIP Major Issues to Watch • Technology Impact of Budget Deficits, Cost of War and Tax Cuts • Another External Shock

23. Federal Government:The Road Ahead Rishi Sood