2012 is here, and with it comes big changes for the Federal IT industry. WashingtonExec gave local executives the opportunity to share their thoughts on where they see the government contracting industry headed.
Robert McHale, Senior Client Partner at Korn/Ferry International, brings a new prospective to the debate.
What will next year hold for Government Contracting?
Robert McHale: The Government Contracting industry does not need a crystal ball to recognize that 2012 will be a tough year for top line growth. Budget cuts will impact programs across federal civilian, DHS, DoD and the Intelligence customer base. From the Korn/Ferry viewpoint we tend to evaluate the market in terms of impact on leadership and talent. The last several years of government contracting have by any measure been characterized by high growth and customer demand. It would be trite to say that business growth has been easy; however there is always a degree of truth in that ‘a rising tide lifts all boats’. Conversely I do believe that we will see a resetting of management talent over the next 36 months. Historically the government contracting community has put a higher premium on technical and domain ‘muscle’, going forward companies will have to be much more creative and business-focused in how they approach winning business with their customers. I believe that business ‘muscle’ will be a key characteristic/ competency sought in the next generation of government contracting leaders, in addition to their domain and technical knowledge.
More M&A Activity? More IT budget cuts?
Robert McHale: As net new program starts become few and far between and growth is gained by keeping what you have and taking programs away from incumbents, top line growth by organic means will be hard to come by. Valuations for pure services companies (and in particular for companies with pure labor based offerings) will be under pressure. At the same time Tier 1 and Tier 2 integrators will selectively look at acquisitions to bolster capabilities or speed migration into potential higher growth market adjacencies. Organizations that have developed “IP” or product like service offerings in Data Analytics, Cloud, Security domain areas will remain ripe targets in the M&A arena.