Which Federal Technology Contractors will Survive and Grow?

The U.S. government spending on contracts fell 3.1 percent last year, the biggest one-year decline since 1997, according to a Bloomberg Government study. That got me thinking — do we need all these many federal technology contractors now and which of them will likely survive and grow in this era of scarcity?

 The Perfect Storm:

The perfect storm is brewing – the deficits are rising, the budgets are being cut, sequestration is in town, and continuing resolutions (CR’s) are now a way of federal CIO’s life! Now add to it the consolidation and efficiency that is happening due to cloud computing, mobility, big data, apps economy and sensor technology – to name a few and we know that today’s federal technology marketplace is in flux and dynamically changing from outside as well as inside pressures. Just take the example of US DOT, my ex-employer – as we move from local Microsoft Exchange environment to email on cloud – hundreds of contracting tech jobs will be eliminated!

 First Response!

The first response from the federal contracting community is all over the place, some companies are splitting up, and others are merging. Some are doubling up on marketing effort, while others are relieving their business development staff. But are they transforming?

 No Intent with Resources?

Interestingly, the large public companies need to be focused on short-term quarter-by-quarter results and seem to be having difficulty, at least from my vantage point of developing a comprehensive change management strategy for surviving and growing in this perfect storm. In my discussions with many such company executives, they have expressed deep frustration that while change is required – top management is focused on short term Wall Street issues rather than taking a deep transformative look. While these companies have the resources and bandwidth to execute change – many times they lack the top management’s commitment and tenacity.

 Intent without Resources?

The smaller tech companies are struggling. As contracts and contractors are being reduced by the federal agencies, there is a ripple effect on small technology businesses that often are subcontractors. These companies don’t have the bandwidth and resources to make the change though they have the need and the intent to make it! The end result is not much transformative progress.

 Intent with Resources?

So that leaves the mid tier companies in the mix. These companies are still in most cases owned by their original owners or held by private equity firms and therefore have the capability to withstand the public pressures and have the resources to change. Also, because these companies are at a size and scale where agile change execution can be implemented they have the most to benefit from this perfect storm – provided they act. The question is — are these company executives willing to look at their inner working of the company and willing to change fundamentally to adapt to the changing landscape – in my advisory work some absolutely are!

 In Conclusion:

In today’s federal marketplace, change is the only constant, innovation enables survival, collaboration creates opportunities, but ultimately transformation leads to success. If you are a federal technology executive — lead this transformation today before transformation leaves your company behind! In future blogs, we will look at specific execution strategies for federal technology contractors from an insider federal major agency CIO perspective for transformation!

 About the author: Nitin Pradhan is the founder of Public Private Innovations, the nation’s first Federal technology accelerator and formally the CIO of the U.S. Department of Transportation. He can be reached via LinkedIn or followed on Twitter.