By Marc B. Marlin
In a market in which websites can look similar, buzz words are common jargon, and critical talent walks out the door and goes home each night, avenues for competitive differentiation are critical in today’s Government services and technology market.
The Federal Government relies on the talented contracting community to achieve its mission. However, the contractor identity often toes the delicate line between that of a staffing company that facilitates a mission and a solutions provider that delivers on the mission. While security clearances and SCIF space, and general incumbency, were formidable barriers to entry in the heyday Defense spending of the early to mid-2000s, we now find contractors in a heightened competitive contracting environment with a broader range of certifications, technology, and products representing key elements of a winning growth strategy across the Defense, Intel and Federal civilian markets. With this paradigm shift in competitive differentiation comes investment decisions beyond recruiters that can “find talent.” More importantly, how much to invest, where to invest and gauging the potential payoff of such investment, are decisions in the C-suite of most Government contractors today.
Skeptics, or loyalists to the old playbook, will promote, “we have the best people.” Not so fast, as certifications such as CMMI Level 3 or other technical certifications or accreditations are increasingly sneaking their way into RFPs for contract vehicles, contracts and task orders. Finding yourself on the sideline from being able to bid, given the lack of institutional investment, can be a five-year to a full decade drag on organic growth.
We saw a prime example of this with firms unable to bid on CIOSP3, who now find themselves with fingers crossed awaiting an on-ramp or chasing CIOSP3 lines of business in the secondary market. Taking a strategic look towards the procurement horizon can foreshadow the corporate investment needs of today.
Technology investment in a proprietary platform, while technically feasible given the deep talent in our industry, brings with it a cost to take that platform to market. This is a financial hurdle that few can overcome or justify the risk of. The sales and marketing alone often requires an investment multiple times greater than the platform development cost itself. Not surprising, most services firms have focused on the integration of the platforms and left the development to the pure play software OEMs.
The best technology doesn’t always win. The Government is also increasingly looking to leverage commercial technology products, and then rely on contractors to integrate them into the Federal infrastructure and bureaucracy. Prime examples are the recently proposed Cerner adoption by DHA, an Amazon cloud for the IC, and rapid adoption of Salesforce and ServiceNow Government wide. If the investment in the platform is prohibitive, then what? The answer comes down to firms that can codify delivery processes and methodologies that can put certified technical folks – those aforementioned gurus who go home each night – in the best position to be successful. Moreover, having critical mass of those types of folks, albeit through active recruiting or investment in professional development, matters.
It matters from a corporate identity, employee retention, and in many cases, the financial arbitrage of building those qualifications internally versus buying them through strategic hires. Certified Cloud Security Professional (CCSP); Certified in Risk and Information Systems Control (CRISC), especially if coupled w/ Risk Management Professional (RMP); the portfolio of AWS, Azure, or Salesforce professional certifications; and Certified Information Systems Security Professional (CISSP) amongst others, have become the modern day competitive differentiator, that translate website rhetoric into proven capabilities.
Finally, the why? Why make the investment, and how does it translate to value enhancement? The answer lies in sustainable growth and a market position yielding higher transaction multiples. Value creation is a combination of maximizing growth, minimizing risk, and optimizing leveragability (the proverbial 1+1=3). These higher-end technology platforms and market opportunities are perceived to present above market average growth potential, and that’s what Wall St. and private investors alike are thirsty for. Salesforce alone assesses the public sectors as a greater than $5 billion market by 2020, and with single digit market penetration, riding these coat-tails as an integrator presents a compelling value proposition. It’s not hard to see why technology competency is white hot from an M&A perspective, as evidenced by the PhaseOne, InfoReliance, NES, and InfoZen transactions to name a few. The other side of the coin is risk, which dovetails with leveragability. The aforementioned certifications and best practice provide those barriers to entry, and afford a place at the contracting table. More importantly, however, the larger, most aggressive acquirers who also present the best opportunity for outside value creation, are often able to translate some critical mass of technology/product into hundreds of millions or billion-dollar programs. Thus, enhancing IT modernization capabilities is a critical part of the modern day larger contractor’s strategic roadmap. Sharing a fraction of that synergy value moves the needle in terms of the smaller or mid-market contractor’s value proposition.
[su_pullquote align=”right”] “We’re in the midst of a technology revolution, probably that of a magnitude not seen since the Internet became mass market, and the Federal Government is taking notice.”[/su_pullquote]We’re in the midst of a technology revolution, probably that of a magnitude not seen since the Internet became mass market, and the Federal Government is taking notice. With chaos comes opportunity, and the opportunity for those able to harness the power of technology and bring it to bear to solve problems, have much success in front of them.
