In this study, 70 percent of government IT decision-makers report moderate to high impact of the “convergence” of technology and professional services, or consumption-based “as a service” acquisition approaches, on the government marketplace. This research benchmarks the status of convergence and reveals gaps in adoption and understanding between government and the contractors who serve them. Both government decision-makers and contractors agree that convergence is causing a shift in how government buys and industry provides solutions, yet government respondents reveal significant perceived barriers to adoption such as security risks and cost concerns.

1. Market Connections, Inc. and Professional Services Council present
“As a Service:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION
OCTOBER 2014
© 2014 Market Connections, Inc.

2. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
Study Objectives
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION 2
•Benchmark current state of the convergence of technologies and services in the federal marketplace.
•Assess important contractor attributes in providing a converged solution.
•Understand the use of, and opportunities around “as a service” acquisition model for technology solutions.
•Assess benefits and barriers to the adoption of an “as a service” model.

3. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION 3
Audience Demographics
Civilian Agencies 68%
Defense Agencies
21%
Congress11%
Federal Agency Type
Upto $60M
42%
$61M to $999M
27%
Above $1B32%
Contractor Annual Revenue

4. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
34%
43%
43%
46%
47%
63%
76%
%
20%
40%
60%
80%
Drafting/writing RFP
Make final decision or approve the purchase
Allocation of budget dollars
Identification of potentialcontractors/suppliers
Evaluation proposals/bids/quotes
Determination of requirements, specifications or features
Identification of need for product/service
4
Involvement in IT Acquisition
GOVERNMENT
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION
Which of the following tasks have you been involved with in the selection or acquisition of IT products and services?
Note: Multiple responses allowed, percentages will add to > 100%.

5. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
Familiarity with Convergence
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION 5
How familiar are you with the convergence of technologies and services in the federal marketplace?
26%
47%
14%
13%
Government
Very Familiar
SomewhatFamiliar
Heard of It
Not familiar
36%
54%
10%
Contractors

6. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
Convergence Definition
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION 6
The combination of technologies and services to create new solutions and new approaches to deliver mission results.
“Services” throughout this survey refers to the use of contractor personnel to perform functions in support of government missions. It does not refer to acquisition advisory and assistance services that could create a conflict of interest.

7. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
Key Findings
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION 7
•We are in the early stages of awareness and understanding, and contractors are ahead of government.
•Convergence is about more than IT.
•There are significant disconnects between industry opportunity areas and government adoption plans.
•Convergence brings both opportunities and barriers to adoption.

8. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
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Impact of Convergence
GOVERNMENT vs. CONTRACTORS
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION
4%
21%
47%
23%
5%
4%
19%
47%
28%
2%
0%
20%
40%
60%
No impact
Low impact
Moderateimpact
High impact
Don't know
Federal Employees
Contractors
To what extent is the convergence of technologies and services in the federal marketplace impacting your organization or agency?
Nearly 75% of respondents report moderate to high impact

9. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
6%
56%
19%
25%
23%
19%
28%
16%
0%
20%
40%
60%
Low impact
High impact
10,000+ employees
500 - 9,999
100 - 499
Less than 100 employees
9
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION
Impact of Convergence
SMALL vs. LARGE CONTRACTORS
= significant differences
To what extent is the convergence of technologies and services in the federal marketplace impacting your organization?

10. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
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Impact Reasons
CONTRACTORS
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION
We're seeing a shift in our entire business model, moving from a standard purchase of products to a service model.
GOVERNMENT CONTRACTORHIGH IMPACT
Our firm will be delivering our capability 'as a service' in the future rather than 'as a product,’ and we will have to bundle others’ services to provide a complete solution.
GOVERNMENT CONTRACTORHIGH IMPACT
“
”
We are starting to see more ‘convergence’ (Shared Services, ‘As a Service’) opportunities, but the playing field is dominated by the larger firms (Accenture, IBM, etc.) and we really haven't been able to play more than a supporting role (Enterprise Architecture, Program Management, etc.). We expect the market for middle tier players to grow, however.
GOVERNMENT CONTRACTORLOW IMPACT

11. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
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“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION
Impact of Convergence
FEDERAL DIFFERENCES BY JOB ROLE
2%
30%
41%
10%
43%
41%
52%
21%
15%
34%
4%
4%
3%
0%
20%
40%
60%
80%
100%
IT/Tech Svcs
Prog mgmt/execution
Exec mgmt/command
No impact
Low impact
Moderate impact
High impact
Don't know
= significant differences
To what extent is the convergence of technologies and services in the federal marketplace impacting your organization?

12. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
12
Impact Reasons
GOVERNMENT
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION
Declining agency budgets are driving re-evaluation of how we acquire technology and services.
FEDERAL RESPONDENTHIGH IMPACT
Provides state of the art technological solutions faster and at a lower life cycle cost than if we were to procure only the technologies without the services.
FEDERAL RESPONDENTHIGH IMPACT
“
”
My agency is reluctant to implement the principles of convergence. Most systems are siloedsolutions. As an senior IT manager, I'd like to see that change, but it is very difficult.
FEDERAL RESPONDENTLOW IMPACT
We are slow to adopt, much less consider, outsourced solutions due to regulations and security.
FEDERAL RESPONDENTLOW IMPACT

13. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
Technology Convergence Trends
GOVERNMENT vs. CONTRACTORS
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION 13
To what extent do you agree with the following statements?

14. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
Technology Convergence Trends
GOVERNMENT vs. CONTRACTORS
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION 14
To what extent do you agree with the following statements?

15. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
Technology Convergence Trends
GOVERNMENT vs. CONTRACTORS
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION 15
To what extent do you agree with the following statements?

16. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
Technology Convergence Trends
GOVERNMENT vs. CONTRACTORS
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION 16
To what extent do you agree with the following statements?

17. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
Technology Convergence Trends
GOVERNMENT vs. CONTRACTORS
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION 17
To what extent do you agree with the following statements?

18. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
Technology Convergence Trends
GOVERNMENT vs. CONTRACTORS
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION 18
To what extent do you agree with the following statements?

19. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION 19
To what extent do you agree with the following statement? It is important for a federal agency to work with a company that can deliver services and technology in an integrated solution
Technology Convergence Trends
DEFENSE vs. CIVILIAN DIFFERENCES
3%
17%
19%
15%
78%
68%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Civilian
Defense
Disagree
Neither Agree nor Disagree
Agree
Importance of working with a company that can deliver services and technology in an integrated solution

20. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
20
Top Four “As a Service” Benefits
GOVERNMENT vs. CONTRACTORS
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION
What do you see as the main benefits of “XaaS” for the federal government? Select the top three.
32%
41%
48%
56%
38%
39%
43%
50%
0%
20%
40%
60%
Improvedperformance
Rapidly deploynew services
Scalability
Pay only for whatis needed
Government
32%
41%
48%
56%
38%
39%
43%
50%
0%
10%
20%
30%
40%
50%
60%
Contractors

21. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
24%
43%
33%
23%
25%
31%
35%
35%
0%
10%
20%
30%
40%
50%
Improved reliability
Little or no capitalexpenditure
Enables sharing ofresources and costs
Improved security
Government
Contractors
21
“As a Service” Benefits
GOVERNMENT vs. CONTRACTORS
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION
What do you see as the main benefits of “XaaS” for the federal government? Select the top three.
= significant differences

22. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
22
Top Barriers to “As a Service” Adoption
GOVERNMENT vs. CONTRACTORS
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION
10%
33%
24%
46%
28%
33%
45%
60%
0%
20%
40%
60%
80%
Upredictable costs
Vendor or solution lock-in
Budget constraints
Security issues/risks
Government
Contractors
What, if anything, would hinder or prevent federal agencies from moving to implement the XaaS model?
= significant differences

23. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
23
Barriers to “As a Service” Adoption
GOVERNMENT vs. CONTRACTORS
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION
21%
31%
10%
26%
27%
36%
28%
12%
16%
17%
20%
21%
21%
23%
0%
10%
20%
30%
40%
Not sure how to implement
Lack of procurement guidance
Intellectual property issues
Cultural barriers
Loss of control
Requirements not well-defined
Desire to own the solution
Government
Contractors
What, if anything, would hinder or prevent federal agencies from moving to implement the XaaS model?
= significant differences

24. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
Federal “As a Service” Current Use
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION 24
Of the following XaaS areas, where is your agency or organization with respect to implementation and use?
20%
20%
22%
23%
29%
31%
0%
5%
10%
15%
20%
25%
30%
35%
Training
Platform
Monitoring
Infrastructure
Software
Communications

25. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
Opportunity Areas for “As a Service”
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION 25
CONTRACTORS: What are the top three greatest areas of “XaaS” opportunity in government over the next three years?
GOVERNMENT: Of the following XaaSareas, where is your agency or organization with respect to implementation and use? (Plans to implement in next 12 months or beyond 12 months)
25%
21%
21%
21%
20%
17%
56%
41%
58%
64%
43%
35%
0%
10%
20%
30%
40%
50%
60%
70%
Platform
Monitoring
Infrastructure
Software
Communications
Training
Government Plans Next 12 Months and Beyond
Contractor Perceived Opportunities Next 3 Years
GOVERNMENT vs. CONTRACTORS
= significant differences

26. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
93%
89%
92%
90%
81%
84%
84%
86%
0%
20%
40%
60%
80%
100%
Understand customermission
Cost competitive
Secure solutions
Subject matter expertise
Government
Contractors
26
Top Important Characteristics of Contractors
GOVERNMENT vs. CONTRACTORS
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION
How important is it for a contractor to have the following characteristics when aiming to deliver a converged solution to thefederal government? (Top 2 ratings)

27. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
69%
69%
72%
82%
66%
69%
71%
77%
0%
20%
40%
60%
80%
100%
Ability to bring latesttechnological innovations
End-to-end solutions
Speed of delivery
Experience providingconverged solutions
Government
Contractors
27
Important Characteristics of Contractors
GOVERNMENT vs. CONTRACTORS
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION
How important is it for a contractor to have the following characteristics when aiming to deliver a converged solution to thefederal government? (Top 2 ratings)

28. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
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“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION
RELEASE EVENT: October 14
•In-depth results
•Panel discussion with government and contractors
www.pscouncil.org/convergence

29. CONVERGENCE STUDY | MARKET CONNECTIONS, INC. & PROFESSIONAL SERVICES COUNCIL
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Lisa Dezzutti, President & CEO | Market Connections, Inc.
703-378-2025 x103 | lisad@marketconnectionsinc.com
Cathy Cromley, Director of Business Development | Market Connections, Inc.
703-517-4419 | cathyc@marketconnectionsinc.com
Dave Wennergren, Sr. Vice President, Technology Policy | Professional Services Council
703-778-7557 | wennergren@pscouncil.org
“AS A SERVICE:” A FOUNDATIONAL SHIFT IN GOVERNMENT ACQUISITION