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TBR Public Sector IT Spending Benchmark Report
 

TBR Public Sector IT Spending Benchmark Report

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IT budgets in the public sector have taken a beating since late 2010, with growth stalling due to defense cuts and budgetary turmoil throughout 2011. Several big vendors saw revenues decline, while a ...

IT budgets in the public sector have taken a beating since late 2010, with growth stalling due to defense cuts and budgetary turmoil throughout 2011. Several big vendors saw revenues decline, while a select handful adjusted their course in response to market conditions and managed to grow their top lines. TBR tracks 16 key players in this vertical on a quarterly basis, and our data and insight indicates that in 2011:
• IT services firms serving the public sector realigned portfolios to follow the budgetary reprioritizations in the federal government’s IT spending;
• Vendors were compelled to focus on margin performance in lieu of top-line growth through operational excellence and a focus on strong contract performance;
• Some companies are looking beyond their core market in the U.S., hoping to leverage their capabilities to gain traction with international government clients as well as new clients in the commercial sector.

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  • Average revenue growth for the 20 firms in the Public Sector IT Services Benchmark was 0.8% in 2011, falling from 18.2% in 2010Average revenue growth for the 20 firms in the Public Sector IT Services Benchmark is estimated to be -2.2% in 4Q11, falling from 0.2% in 3Q11 and decelerating for the sixth straight quarter
  • Enhance business development processesInvestments in BDInternal: new/upgraded CRM systemsExternal: draw closer to customers, put more executive management in front of clients, anticipate client needs & spending trendsIncrease number of proposals submitted; focus on reducing customer costs, expediting timelines and improving efficienciesEnhance subcontractor relationships and collaboration with other vendors, bring the right team to the tableSmaller competitors (ManTech, CACI) focusing on winning more awards as prime contractorPortfolio reshaping to align with shifting federal spending prioritiesCybersecurity, C4ISR, Intelligence, IT Modernization, Data center consolidation, Cloud migration mapping, Logistics
  • Expansion into adjacent and parallel markets; diversify revenue basesDomestically: health IT, public safety, energy, commercial/state/local sectorsInternationally Showcasing solutions & cross-selling to foreign military customersBorder security, C4ISR, cyber, commercial sectorsTiming of awards difficult to predictLeverage acquisitions to enhance positioning and capabilities in areas that will receive continued funding prioritizationGeneral Dynamics/Vangent made the biggest “splash” in the health IT spaceManTech & CACI continue to execute aggressive M&A strategiesExpand alliance ecosystems to enhance offerings in areas where spending will be sustained or grow (e.g., cloud)CACI joining the Amazon Web Services programRaytheon NCS seeking SMB partners on SOCOM contracts
  • Reduce operational dragFacilities consolidation, reduce operational redundanciesConsolidation of IT infrastructureStreamline supply chains, improve existing internal SCM/ERP systemsExamples: Raytheon’s “supply-chain” initiative; Lockheed Martin’s voluntary headcount reductions to management & employee baseEnhance contract delivery and performanceEnsure repeat business & a high level of successful recompetesIncreasing employee utilization/productivityMinimize unprofitable activitiesDeemphasize or exit less profitable business lines, contracts and/or programs (e.g., Northrop exiting Nevada Test Site JV)Increased contract selectivity, avoid margin dilutive contractsShift portfolios out of low growth/margin areas to more stable and higher margin areas

TBR Public Sector IT Spending Benchmark Report TBR Public Sector IT Spending Benchmark Report Presentation Transcript

  • PROFESSIONAL SERVICES BUSINESS QUARTERLYSMThe Challenging Federal Technology Market:Insights from TBR’s Public Sector IT Services BenchmarkTBR Webinar SeriesSpring 2012Original Webinar Date: March 21, 2012Presenter:John Caucis, Public Sector Practice Manager (john.caucis@tbri.com) TBR T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C .
  • TBRToday’s Presenter John Caucis Manager, Public Sector Practice Technology Business Research, Inc. (TBR) Twitter: @jcaucistbr2 The Challenging Federal Technology Market: ©2012 Technology Business Research Inc. Insights from TBR’s Public Sector IT Services Benchmark
  • Key Takeaways: State of the Market TBR2011 was a difficult year for IT vendors serving the public sector …How have vendors been impacted? The market environment in 2011 was hostile to 12 of 20 growth. What was the state of the market and what were the of vendors in the Public headwinds to growth? Sector Benchmark saw their How are vendors coping? revenues decline in 2011 What is the outlook for 2012? SOURCE: TBR PROFESSIONAL SERVICES PUBLIC SECTOR BENCHMARK STUDY 3 The Challenging Federal Technology Market: ©2012 Technology Business Research Inc. Insights from TBR’s Public Sector IT Services Benchmark
  • Key Takeaways: State of the Market TBRThe tumultuous federal budget process and lower IT spendingrestrained growth for most federal IT contractors in 2011 The series of continuing resolutions delayed spending decisions and extended acquisition cycles. Federal IT spending in FY11 was ultimately less than the funding authorized. Defense cuts and the draw-down of operations in Iraq and Afghanistan also impacted top-line performance and tempered vendors’ outlooks for 2012. The Challenging Federal Technology Market: 4 ©2012 Technology Business Research Inc. Insights from TBR’s Public Sector IT Services Benchmark
  • Key Takeaways: State of the Market & Growth Trends TBRGrowth data reflects how market conditions have grownprogressively more challenging since 2010 The Challenging Federal Technology Market: 5 ©2012 Technology Business Research Inc. Insights from TBR’s Public Sector IT Services Benchmark
  • Key Takeaways in 2011: Vendor Actions TBRVendors are undertaking a number of measures to cope with thechallenging market environment …• Enhance the business development processes.• Portfolio reshaping• Align portfolio and strategies with shifting federal spending priorities. The Challenging Federal Technology Market:6 ©2012 Technology Business Research Inc. Insights from TBR’s Public Sector IT Services Benchmark
  • Key Takeaways in 2011: Vendor Actions TBRGenerate new revenue streams …• Expand into adjacent and parallel markets; diversify revenue bases.• Leverage acquisitions to enhance positioning and capabilities in areas that will receive continued funding prioritization.• Expand alliance ecosystems to enhance offerings in areas where spending will be sustained or grow (e.g., cloud). The Challenging Federal Technology Market:7 ©2012 Technology Business Research Inc. Insights from TBR’s Public Sector IT Services Benchmark
  • Key Takeaways in 2011: Vendor Actions TBRAnd preserve margin performance …• Reduce operational drag.• Enhance contract delivery and performance.• Minimize unprofitable activities. The Challenging Federal Technology Market:8 ©2012 Technology Business Research Inc. Insights from TBR’s Public Sector IT Services Benchmark
  • TBR Scoring Summary: Scoring Performance & Ranking in 3Q11 TBRGovernment-centric scoring leaders IBM, Harris and Accenturetended to be the growth and margin leaders SOURCE: COMPANY DATA; TBR ESTIMATES The Challenging Federal Technology Market:9 ©2012 Technology Business Research Inc. Insights from TBR’s Public Sector IT Services Benchmark
  • Outlook 2012: Market Trends TBRGrowth in federal IT spending is expected to be marginal in 2012(and likely again in 2013)• The 2012 Federal IT budget request is $80.9 billion, up 2.7% from $78.8 billion in the 2011 budget.• TBR estimates 52% of the spend will be civilian, rising 2.5% to 3.0%; 48% will be defense-related, with flat to 0.5% growth.• Not all departments/agencies will see an increase; some are facing steep cuts. The Challenging Federal Technology Market:10 ©2012 Technology Business Research Inc. Insights from TBR’s Public Sector IT Services Benchmark
  • Outlook 2012: Market Trends TBRFederal IT spending in 2012 will be focused on cutting costs anddoing more with the same (or less)• Federal IT buyers will prioritize solutions that streamline and simplify operations.• Spending on new IT infrastructure will be limited.• Growing interest in social media, mobility & analytics The Challenging Federal Technology Market:11 ©2012 Technology Business Research Inc. Insights from TBR’s Public Sector IT Services Benchmark
  • TBRTBR Public Sector Resources: TBR Public Sector Professional Services Business Quarterly Reports: • Vendor Reports: o Northrop Grumman (Information Systems & Technical Services) o Lockheed Martin (Information Systems & Global Solutions) o General Dynamics (Information Systems and Technology) o Raytheon (Intelligence & Information Systems, Network Centric Systems & Technical Services) o L-3 Communications (C4ISR & Government Services) o SAIC o ManTech o Booz Allen Hamilton o CACI • End of the quarter benchmark also includes Harris IT, ITT (Defense & Intelligence Solutions), KBR and NCI for scoring purposes only • Public sector operations of commercially- centric IT services firms in the benchmark: o IBM Global Services o Unisys o HP Services o Xerox Services o Accenture o Dell Services o CSC The Challenging Federal Technology Market:12 ©2012 Technology Business Research Inc. Insights from TBR’s Public Sector IT Services Benchmark
  • About TBR Contact UsTechnology Business Research (TBR) is a leading independent 1.603.929.1166technology market research and consulting firm specializing in the info@tbri.combusiness and financial analyses of hardware, software, networkingequipment, wireless, portal and professional services vendors. www.tbri.com 11 Merrill DriveServing a global clientele, TBR provides timely and accurate market Hampton, NH 03842research and business intelligence in formats that are tailored to USAclients’ needs. Our analysts are available to further address client-specific issues or information needs on an inquiry or proprietaryconsulting basis.TBR has been empowering corporate decision makers since 1996.To learn how our analysts can address your unique business needs,please visit our website or contact us today. TBR All reports are available in PowerPoint and PDF. If you are viewing a PDF and require access to data, tables, etc. for use in internal documents, please visit www.tbri.com and download the PowerPoint version. T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C .This report is based on information made available to the public by the vendor and other public sources. No representation is made that this information is accurate or complete. TechnologyBusiness Research will not be held liable or responsible for any decisions that are made based on this information. The information contained in this report and all other TBR products is notand should not be construed to be investment advice. TBR does not make any recommendations or provide any advice regarding the value, purchase, sale or retention of securities. This reportis copyright-protected and supplied for the sole use of the recipient. Contact Technology Business Research, Inc. for permission to reproduce.