Directions

If Taxes Are Inevitable, Cash In

Tackling the government sector can pay long-term dividends.

• By Paul DeGroot
• March 01, 2010

Partners that are looking for someone -- anyone -- who's still spending money on IT projects may be overlooking an industry that doesn't always show up on their radar: government.

It's true that, except for some significant funding for broadband expansion, not many IT projects are -- or ever will be -- "shovel-ready." Some billions are also being directed at health care IT, but that will affect only a subset of IT players.

In some cases, IT will still get a boost as a side effect: major highway, railroad and other infrastructure projects still need project management, communications, reporting and data collection. Even if a mere 5 percent of the $200 billion directed at physical infrastructure is IT-related, it's a market worth pursuing for those with the appropriate skills.

But behind all the headline projects, less well-known opportunities may offer plenty of upside for most partners, partly because many stimulus funds are routed through existing programs, and other funds have been allocated to reduce the pain that state and local governments have experienced as a result of collapses in house prices and, therefore, declining revenue from property taxes. IDC estimates that annual growth in U.S. health care IT spending will remain close to 7 percent, and for federal, state and local governments, greater than 6 percent, compared with 4.7 percent across all industry verticals. I'd organize these opportunities under two headings.

First, a younger and more tech-savvy crowd in Washington is willing to put more eggs in the tech basket. A commitment to "transparency" in government, for example, aims to make government databases and government activities, such as stimulus funding, more visible to the public. Even without that crisis-stimulus boost, however, it's worth noting that governments have been steadily, if unevenly, increasing their use of technology. Stuff that governments spend millions of dollars and hours on, such as managing forms and keeping track of the people they serve or regulate, lend themselves to technologies like portals, workflow, digital documents and relationship-management software, all of which can help governments work both faster and cheaper.

Second, some of the features that software companies have been adding for commercial customers -- often with regulators nipping at their heels -- turn out to be very well suited for public sector agencies. For example, the document-management and archiving features of SharePoint, which have improved steadily over the last several versions, can do things that paper-filing systems will never be able to do. These include automatically moving documents to an archive based on a date or other attributes; categorize them automatically based on their contents; and search through an archive of hundreds of thousands of documents in a few seconds. Journaling features in Exchange and Office Communications Server, developed for the financial industry, can also track the communications of civil servants. Rights-management features in Office, supported by SharePoint, provide another layer of protection for confidential documents in both business and government.

Most of Microsoft's public-sector revenue, in fact, comes from core products like Office, Exchange and SharePoint, in which a lot of partners have a lot of skills.

To be sure, government-procurement processes can be complex, the decision-making process can be long, and the results of a failed IT project will in many cases become a matter of public record -- along with the name of the contractor who ran it. But tackling this economic sector can pay long-term dividends because governments are somewhat insulated from economic dips -- they're less likely to lay off 30 percent of their workforce, for example -- and IT projects in this space can often generate not only real ROI and savings, but visible improvements in public services that can justify, or at least reduce, the pain of the higher taxes that might be required to pay for them.

Thus, being able to navigate public-sector processes can be a way for integrators and developers to keep their doors open even when commercial opportunities disappear.

Next Time: Partner Programs of the Future