Bert Notini, Senior Advisor at New Mountain Capital spoke with WashingtonExec about the “mixed and possibly stormy” upcoming year in government contracting. Notini is the former Chairman and CEO of Apptis, acquired by URS earlier this year. Notini is also a board member of Deltek and Camber Corporation.
Bert Notini: Looking ahead to 2012, the macro trends that set the tone in 2011 will likely continue, only more so. At the top of the list, growth headwinds will dominate the industry landscape. Highly charged budget pressures airing on the nightly news, the dynamics of a Presidential election year and drawdowns in Southwest Asia, among other events, will be drivers for much of 2012. In short, it will be a year of change, churn and aggressive competition. Watch for a continued high level of M&A activity as companies expand beyond their traditional lanes. They will be adding new capabilities to bring more value to their existing customers and acquiring businesses to add new customers. Given the low public market valuations for the industry, we may also see a larger company divest slower growing divisions to realize a greater valuation multiple. And as the DOD wrestles with its spending mandates, significant repositioning among government contractors will follow. 2012 will be the year when companies must position themselves for growth and success in the new world of 2013 and beyond.
From an IT perspective, the industry will commit to data center consolidation and cloud computing architectures while at the same time raising the bar on security requirements. These procurements may not result in large scale business until FY2013, but the RFP’s will be out in 2012. Leveraging these secular technology shifts, along with mobility, is critical for federal customers to deliver on their missions while living within the confines of tighter budgets. Cyber will no doubt continue to be major focus area in 2012, and may accelerate depending on what Congress does with pending cyber security legislation. Companies on the front end of these trends will benefit. Those that are repackaging old solutions will struggle. 2012 will be more about getting started doing the work of data center consolidation, cloud adoption and cyber security enhancement rather than defining the new technology trends.
The outlook for industry and government collaboration in 2012 is mixed and possibly stormy. Bid protests continue to be robust, Congress has its vocal industry skeptics and priorities are changing fast. As customers and contractors alike try to meet increasing demands with fewer resources, some relationships will be strained as old ways of performing work have to change. Collaboration will have to be played out at the micro customer level as there is no indication that there will unified political leadership on key issues until the election cycle is over. It will be a year when companies will have to really know their customers, be totally focused on the customer’s mission and most importantly be trusted to deliver for customers in new ways that bridge to the future at lower costs.