2014 – WashingtonExec Annual Market Outlook Series
As we turn the page on 2013, we look forward to a new year and new opportunities for innovation and growth in the government contracting community. This past year we experienced budget sequestration, a 16-day-long government shutdown, and a perpetually increasing focus on cyber security and healthcare IT.
WashingtonExec reached out to those most knowledgeable and experienced individuals in the federal contracting space. We asked executives in and around the beltway for insight regarding where they see the government contracting community headed in 2014. Topics discussed include M&A activity, cloud computing, healthcare IT, defense, mobility, and more.
Sumeet Shrivastava, the President of Array Information Technology, was recently honored among the top 20 Prominent Patriots by George Mason University School of Management at its annual business alumni event, and says financial uncertainty due to budget fickleness will continue to color the 2014 government contracting market:
“It’s hard to see too many things changing from what we’ve experienced this past year; although, we don’t necessarily see as much uncertainty heading into 2014 as we had at the beginning of this year (aka sequestration). There still is a significant lack of insight into what the IT budgets will really look like over the next few years. I think it’s fair to say that planning on anything more than a flat line budget would be a huge risk for any government contractor. Much of this uncertainty starts with the fact that agency CIO’s and IT managers continue to be hampered with the inability to properly plan their IT investments. It is hard to plan what to invest in when you don’t know what you have to invest. That notwithstanding like any unknown situation this creates a significant market opportunity for those contractors who can strategically help an organization realign its existing IT assets against the rapidly evolving agency mission needs. As an example, legacy modernization solutions that can be executed within the confines of the O&M budget line could be the holy grail for a government contractor over the next couple of years.
In terms of M&A activity, it would be hard not to beat the activity levels of 2013. I do not foresee a whole lot more, but we do have a little bit more clarity about the IT budget line, and as a result I think you will see a slight pickup in the M&A community. I would expect to see continued activity focused on the high priority mission areas that are being funded, including niche players in the cyber security, mobility, and big data environments. It’s also possible that with the tight budget scenarios predicted for the next couple of years that you could see one or two large consolidation deals amongst the pool of large SI contractors.
Industry and government collaboration, on the other hand, is the area that may need the single most improvement in our industry. In the 20 years that I’ve been in the federal marketplace, I feel like the last couple of years has seen a significant drop in the amount of real collaboration between industry and government. It feels like the surface level chatter has increased exponentially with the growth of social media but the depth of those conversations has not led to as many concrete actions being taken on the tough issues. The area I see the biggest problem today is in the acquisition landscape. There has been a significant reduction of receptivity to asynchronous communications that is vital to enable industry to bring innovative solutions to our government counterparts. It’s hard for me to understand how a vendor can truly bring their own innovative approach to a problem when in “interest of protecting the tax payer dollar” it’s likely that their procurement will level the whole playing field and turn a complex system solution into a lowest price/ technically acceptable (LPTA) acquisition. I believe that enough people have recognized this problem and are in a position to effect change that we will see real movement in the quality of collaboration. This will enable us to address tough issues despite of the budget crisis that we will face over the next few years.”