Governments and taxpayers are often seen as a safe refuge when tough times force companies to delay projects and shutter spending. And for some resellers watching their corporate customers put orders on hold, a government contract can be the lifeline that pulls them through the recession.
But right now a ticket to Parliament House is far from guaranteed; some areas of government are tightening their belts and long-standing Canberra resellers are feeling the pinch.
Witness Oakton Limited, an IT consultancy that works closely with government, which announced on
17 February a half-yearly net profit after tax of $6.4 million, down 48.7 percent. Oakton managing director and CEO Neil Wilson blamed the company's performance on reduced levels of Federal Government demand and the global financial crisis.
The key to government contracts is knowing what to go for and how to get it. As the stimulus package shows, there is plenty of money around and a good amount is destined to be spent on IT this year.
IDC said the biggest of the top five technologies for the year is the outsourcing of services. This is closely followed by mobile voice, the consulting and integration of services, fixed voice and then IP data. The top ICT buyers will be the biggest spenders in these areas and they are banking and government. Education is also high on the list.
Melissa Martin, senior market analyst at research company IDC, said the stimulus package is a
great opportunity. "As we have observed in past economic situations, such as the Asian financial crisis in 1997, governments are often seen as a lender of last resort in order to stimulate the economic recovery of their countries," Martin said.
"While it is expected that commercial organisations look towards cost-cutting measures to survive, governments are expected to boost spending in order to stimulate demand.
"In this financial crisis, we see this again taking place on a global level, as well as at a national level, with
a government stimulus package coming from the Australian Government worth $10.4 billion. While not all the measures announced include specific ICT expenditure-related items, their net effect is likely to have
a positive impact on the ICT industry within Australia."
And that's definitely good news for the channel. Mark Deere Jones, business systems group director at Panasonic, points out that one of the best aspects of working with the government is you know it can pay its bills.
"While capital expenditure through the corporate or private business world is being reduced, I don't see that in government," Deere Jones said.
But what will sell? Boaz Fischer, managing director at CommsNet Group, said he thinks there are opportunities in government for organisations that create value through their solutions and services. He said that although budget constraints are in place at government departments, there are opportunities in consolidation, efficiencies and cost savings.
"In these times of market turmoil, businesses will survive and prosper if they can offer value- driven benefits."
For many government departments, that equals providing better services at cheaper prices.
Efficiency, the easy sell
Jack Glazenburg's company is called Nu Teck Communications and his reseller organisation specialises in phone systems. Nu Teck and Cooma-based RJS Communications recently deployed ShoreTel at Cooma Council in NSW. Glazenburg's customers include the NSW Parliamentary Counsel's Office. He said that the proposed Government stimulus will create a bounce in buyer confidence.
"It will release monies into the system that will flow down, for sure, and there may well be supporting tax incentives and lower interest rates that will further promote sales of technology," Glazenburg said.
"Government access to capital and its ability to invest in new technology during tough times creates opportunities for companies like us."
He said local government is a "key market" for upgrading telephony to Unified Communications systems.
"Local government is particularly interested in pure (Unified Communications) systems that provide access to all features and functions whether an employee is at the office, home or on the road."
Glazenburg said that for resellers, growing pressure on government employees to be more productive has created opportunities for technology resellers.
"The business case for (Unified Communications) with mobility integration is a strong one," he said. "Government at all levels is interested in the total cost of ownership as well as the traditional issues of reliability, scalability and ease of use. Being able to demonstrate the highest levels of customer satisfaction in the market is another hot button for government."
Storage vendor EMC also sees government striving for efficiencies. EMC's Australian general manager, David Henderson, said the stimulus impacts all sectors of government. "The investment in federal, state and local government will present opportunities across Australia for resellers," Henderson said. "This means all partners will have an opportunity to work with branches of government, with education being a standout. Infrastructure investment will create a demand for better storage, content management, archiving and file sharing," he said.
Martin Milthorpe, government sales director atNetApp, sees shared services as one of the largest opportunities in government. "The shared services groups, such as ZenITex in Victoria and the South Australian Government's shared services centre, are looking at saving the government a lot of money on their IT spend by consolidating a range of different types of IT services, applications, hardware and people. This creates a lot of opportunity and provides a high degree of supportive architecture and a simpler way of providing an IT environment," he said.
Milthorpe said NetApp is working on a couple of these shared opportunities. He said opportunities for partners come from defining their role in the consolidation environment around managed services, architecture, strategy and the operational processes.
"Process improvement is a major part of making the shared services offer for the whole of government come to life," he said.
Zoe Nicholson, Sophos channel sales manager, said the security vendor's lab identifies about 1000 new items of malware a day and government is frequently targeted. "Privacy and data leakage scares dominated the security news in 2008; the UK military copped some real flak throughout last year, for example," Nicholson said.
"Governments and their public service departments are under the greatest legal pressure and the keenest media scrutiny. So data leakage and encryption requirements will be key within the government agencies. This represents a strong growth area for revenue since there is likely to be investment in new technologies such as centrally managed, full-disk encryption and data leakage prevention."
A key to working with the public sector is identifying what they want to achieve. Pip Marlow is the public sector director at Microsoft and it's her role to help partners win and fulfil government contracts. She sees areas for Microsoft partners aligned to the priorities of the government.
"Think education, think health and think a more efficient and effective government. And then I would say think outreach to citizens because unlike commercial businesses, the government thinks not about making money but about delivering citizen services and our citizens aren't all in the CBD either," Marlow said.
"They are out in remote areas and now more than ever our partners can enable technology to help the government extend services to citizens who don't get those things today without having to drive miles. I think you are going to see technology playing a role in the outreach of additional services and making the lives of average Australians better."
Class, pay attention
At the Federal Government level, Labor was elected on two platforms: health and education. Vendors such as Microsoft and Panasonic see these as key growth areas for the channel over the next few years. "After the first year in, which was a year of review, the Federal Government is going to need to move into action and change agenda - and it is. As that manifests itself there is going to be a lot of opportunities for our partner business in not just health and education but other government spaces as well," said Marlow.
The digital education revolution has been talked about since Kevin Rudd waved around the notion of a computer for every child in every school. In NSW it will mean about 1.3 million children receive a computer. But the laptop is only the beginning - improving numeracy and literacy using technology means more than just hardware.
"Teachers need to learn how to teach using these [IT] tools so professional development for teachers will come through with new learning management systems that makes the learning environment far richer," Marlow said. "I saw a demo on our surface technology the other week of a science lesson where you build the molecule using gestures across the touchscreen. It's going to mean a number of opportunities outside the infrastructure and hardware. People will be looking for transformative applications to really increase numeracy, literacy and learning outcomes, so that's huge."
Panasonic demonstrated its interactive whiteboard technology to teachers in NSW last year.
"We are looking to continue developing our projects in NSW and with other state governments as well.
As CRN reported last year, one of the key educationists said they think the interactive whiteboard is one of the most advanced developments in the education of children in the past 30 years. That's positive news for Panasonic working with the government," said Panasonic's Deere Jones.
Health is the other area of focus for governments, particularly with the bad press public hospitals have been receiving in the last few years. Compounding the problem is Australia's aging population, as 80 percent of healthcare needs are in the past two years of life. To make things worse our healthcare system has been described as fragmented and siloed.
"The Government knows very clearly that it is going to have to do some tremendously different things to fix what's going to happen when the tsunami of elderly people that are going to be hitting the healthcare system. If you look in the US press right now you will see a lot from [US President Barack] Obama around e-health and technology in the health space. That is one thing that didn't come up in the stimulus package so it is an opportunity for us to really give the government feedback," Marlow said.
"We need to be looking at our health stimulus [and asking] how we manage and use technology to get more preventative in healthcare. For example, with sharing information electronically (health records, we are going to have to build standards around those and models around that. That's a tremendous opportunity for partners to help transform the healthcare system."
Deere Jones agrees on the importance of healthcare. Panasonic's vertical markets include the emergency services such as the fire and ambulance services, which are targeted by dedicated resellers. One reseller supplies a cradle for emergency vehicles to hold the Toughbook.
"While we obviously have government contracts we also are very in tune with the requirements from the key people in those areas and we are also working with the Defence Department as well," he said. Panasonic has been talking to the health industry and government hospitals, and plans to do a lot of work in healthcare, said Deere Jones. The company is launching a new tablet called the CFH1 which has antiseptic properties that allow its use in sensitive areas within hospitals.
Be mindful
There will always be pitfalls in every work or contract situation. IDC's Martin said that vendors and resellers should be aware of the impact that Sir Peter Gershon's ICT spending and operations review could have on government buying.
"In the short term, the flow of contracts will slow, as agencies wait for ICT review outcomes and whole-of-government processes to emerge," Martin said. "In the longer term, IDC expects fewer but larger tenders on offer from the government. Vendors and resellers should expect further demands for very low prices and should be prepared for several options: reduce prices to gain contracts, look to form alliances with other companies to win bigger government opportunities, and perhaps also look for more profitable business in the private sector."
Another aspect to consider is the creation of tenders, which can be very complicated, particularly true in the area of computer security.
"Sometimes they ask many more questions than an independent expert in the field would regard as necessary to reach a correct decision," said Nicholson from Sophos. "While it is understandably vital that ‘i's are dotted and ‘t's crossed, doing business with the Government can be inefficient on these grounds.
Resellers who represent vendors that have a solid product training regime, who make and sell their own technology and have specifically committed to the A/NZ region for one of their global technical centres will have a big advantage in bidding for business where a technically complex tender process is involved, thanks to ease of access and technical assistance with all the necessary detail."
Milthorpe from NetApp said channel players should be wary of the time they must commit. A government tender is "a big-time investment", he said. "[Resellers] really need to put their best people into these opportunities and expect a pretty long sales cycle. That, in itself, is a pitfall for smaller organisations. It is a good place to grow your business at the moment because they still do have budget but their budget is being cut back. The message for the channel is that they still need to really focus on cost reduction in terms of people, process and technology."
As a reseller working with governments, Glazenburg has seen that the decision-making process takes time.
"Before making a purchase decision, government buyers have to make thorough assessments and evaluation," Glazenburg said. "There are also layers of decision makers to deal with. To help these buyers make an informed decision, resellers should present as much proof as they can on their business claims. Live product demonstrations, a clear understanding of the tender process, structured business employee and business plans, and demonstrations of proven know-how and support are all critical when dealing with government."
Glazenburg said that government departments are always looking for value for money, reliable and smart telecommunication solutions. "They also want to deal with capable, well-structured companies with a proven track record of delivering turnkey solutions. The critical issue when pitching for government business is to develop a compelling business case and back it up with as much evidence as possible. They also like to see clear measurement criteria and examples of how to evaluate one system over another."
Resellers need to remember that government is distinctly different to the private sector, said EMC's Henderson. "While they often have similar pain points they reference them in a completely different way. Resellers need to tailor their language appropriately for public servants so they can clearly see that the reseller has an understanding and appreciation of their specific needs.
Bureaucracy is a part of government but it doesn't need to be a frustration if partners acknowledge that this is part and parcel of working together upfront. You can see this clearly in the tender process for government business. Resellers need to take the time to understand the mechanism; the rationale is almost irrelevant," Henderson said.
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