Tuesday, January 18, 2011

Small is Beautiful in Government Contracting?

The always prescient Nick Wakeman at Washington Technology has a good article out today about trends he is hearing from the market place. Entitled "Welcome to a New Era of Government Contracting", Nick compiles his take-aways from a finance seminar on the government market organized by Raymond James.The pressure to accomplish a mission while cutting costs is impacting government leaders and the contracting industry in some interesting ways...

Is insourcing dead? Is the era of big systems integrators ruling the roost coming to a close? Will the defense cuts save the economy?

These were some of the dominant themes I heard executives and others talking about at investment bank Raymond James' 10th Annual Government Services & Technology Summit on Thursday.

A variety of public and private companies gave presentations on their strategies. Because three presentations were usually going on simultaneously in different rooms, I couldn’t hear all of them, but the ones I did hear often shared similar themes.

The easy one to explain is the death of insourcing. Several executives and other speakers commented that a year ago insourcing was a big concern, but not so much now as Defense Secretary Robert Gates has publicly admitted that the cost savings he envisioned from moving contractor jobs to government jobs did not materialize. 

Well, so much for that effort...however, I think it is indicative that government leaders are getting more creative and experimenting with new methods to cut costs, reorganize processes while maintaining their missions. More...

The theme that people came back to repeatedly was this idea that size and bulk are not the measures of success they once were for government contractors.

Brian Gesuale, senior vice president of Raymond James, used two leading companies of the past decade as examples.

In the mid-2000s, CACI International and SRA International both were rewarded with growing market valuations as they grew. But while they have continued to grow larger, both have seen the value of their stock decline, Gesuale said.

“The supersizing strategy is not the strategy going forward,” he said.

Instead, Gesuale and other speakers emphasized the need to build value by focusing in on niche capabilities that are close to the customer’s mission.

“We want to be close to the flagpole of the agency” is how Vangent CEO Mac Curtis described it during his presentation.

In other words, whatever your company sells, you need to be able to tie it directly to supporting the mission of the agency. 

Well, no truer words have been spoken....
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