Big Integrator, Big Contracts
With $3 billion in government contracts, SAIC knows its way around D.C.
By Dennis McCafferty, VARBusiness
3:19 PM EST Thurs., Feb. 13, 2003
They are two separate passages of legislation: One dominates the headlines, the other passes in relative obscurity. Yet both
promise to permanently transform the already rapidly shifting face of public-sector IT services as we know it.
The first, the new Department of Homeland Security, combines 22 federal agencies into one department with the potential for $40
billion in contracts. That, coupled with the lower-key, but still eagerly awaited, signing by President George W. Bush on Dec. 17,
2002, of the Electronic Government Act of 2002 could pay off with big dividends. Commonly dubbed the E-Gov Act, this
legislation also signifies fast-track change, as state and local customers will finally be able to access and purchase IT solutions
off the U.S. General Services Administration (GSA) schedule,after years of resistance.
Those are among the developments that plant San Diego-based integrator/VAR Science Applications International Corp. (SAIC)
firmly in the driver's seat. Of its $6.1 billion in total revenue for fiscal 2002, ended Jan. 31, 2002, 56 percent came from federal
sales, with another estimated 3 percent produced by state and local contracts. This makes employee-owned SAIC the
second-largest government player, just behind Bethesda, Md.-based Lockheed Martin, according to Input, a Chantilly, Va.-based
government market research firm. Behind this effort is Ronald J. Knecht, who, as a senior vice president for corporate
development at SAIC, oversees SAIC's federal, state and local sales. In a recent conversation with VARBusiness, Knecht
weighed in on the major changes that have swept the government marketplace in recent times--and what they mean to
government VARs.
snip....
VB: Which is not to say that SAIC isn't doing a lot of integration solution work on multiple customer jobs,projects
that involve federal, state and local customers, as well as quasi-governmental bodies. At the 2002 Winter
Olympics Games, for example, you built a command center and implemented the public-safety information
system in Salt Lake City. How much more of this can we expect to see?
Knecht: That involved what we're about: command and control, consequence prevention and management. When
you're involved with that, it's all about training people to use the equipment so that the on-scene
commander,whether it's a military person or an Olympics coordinator,can marshal the resources and be trained
and prepared. We're now pursuing the same kind of opportunity for the Athens Olympics. And that's just the
beginning. Since Sept. 11, the federal government now has the ability to declare all kinds of public functions as
national security events, such as Super Bowls. We clearly intend to bring the capabilities that we demonstrated
in Utah to these kinds of events. We are way up on the learning curve here.
Also, the U.S. military is taking on more of a support role to civilian authorities in the case of homeland
protection. They're assisting with preparation for times of disaster, such as terrorism attacks. There is simply
no record of all of these branches of state, local and federal government working together on something like
this. So, if we work up a software package that the local sheriff's department can use to communicate with folks
at the federal and state levels, and the military operations people, that's valuable. You can help them manage
events and identify needs for resources. It sounds simple, really, in that it's all about people talking to each
other and accessing each other's data. But it takes great engineering for the whole thing to work.
VB: As the new Department of Homeland Security is being organized, there must be a great deal at stake for SAIC.
Knecht: We're already very well-represented within all the organizations that will be coming together to create the new agency.
We're well-positioned to provide support. Sure, there will obviously be some adjustments and changes. But we're already
supporting the pieces and are prepared to help them make the trade-offs. And we'll be ready and happy to accommodate this
need. Due to our significant presence in the component agencies and our solid systems-integration experience, we believe we
can make a significant contribution to the new department.
VB: This speaks to your overall philosophy about the sales channel and how you work with vendors.
Knecht: Sure. In one sense, we are clearly a value-added reseller. We are a systems integrator that uses a lot of hardware and
software from other companies. But we don't sign quota deals. I don't promise that if I sell a certain amount of dollars of a
product, then I'll get this special pricing. That distorts your ability to provide the right kind of solutions to your customers. What we
do provide to the vendor is our expertise. We really do know how the Army works, and how the Navy works and the many
defense and civil agencies out there. We solve problems. That's different than just trying to sell storage or desktop machines,
although a lot of what we do results in sales of storage and desktop machines.
VB: Beyond homeland-security-related work, what else is driving the federal marketplace from SAIC's point of view?
Knecht: The other really big play is the enterprise. I'll go out on a limb and forecast here: When agencies come up with their 2004
budgets, you'll find a lot of them will get whacked because they're not taking an enterprise view. You're going to see more
enterprise efforts getting funded instead of each agency doing its own thing. The Department of Veterans Affairs is moving a lot
of stovepipes into a central VA structure. That's a profound change. Over at NASA, they're doing the same thing. At the DOD,
they're under way with this at the office of the comptroller to harmonize and streamline all of their financial feeder systems.
We're watching all of this and keeping our finger very closely on the pulse.
VB: You're also involved with e-procurement systems for the government customer. How big do you anticipate that will be?
Knecht: We're still trying to digest the very latest news. In the literally waning minutes of the last congressional session, they
passed the E-Government Act of 2002. This is big. There has always been a real itch to have a federal CIO and put some real
money into the federal government for interagency products,a "let's get these things out of the stovepipes and get it together"
movement. So we're now going to have an official who is responsible for e-government and e-procurement. And they authorized
$350 million during the next four years to enable these kinds of functions. It will also open the GSA IT purchasing schedule to
local and state governments. Before, allowing this kind of purchase access to those levels of government was legislatively
blocked.
VB: What does a VAR have to do, given the changes, to exploit the public marketplace for more opportunities?
Knecht: You have to know the vendors' products. We're working harder and harder at this. I need to know what's coming out
two years from now. What training do I need to better understand your offerings? If you don't know that, you'll be reluctant to
support the products when you go for a project. So the vendors are reaching out more to the integrators to share this technical
information. They know we're not going to propose their offerings unless we're fairly knowledgeable about them.
Remember, the majority of federal government customers aren't in leading-edge tech. They're risk-adverse people, really. They
want solutions that are safe and that work as advertised. There's nothing in the contract that says the solution must be
advanced and at the leading edge of the state of the art.
http://www.varbusiness.com/Components/printArticle.asp?ArticleID=39940
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