Government IT Contracts Come With Risks

There are many short-term opportunities for IT vendors in the form of government contracts, but vendors must balance their contracts with long-term IT directives as well, according to a new report from Yankee Group. The report, "The Yankee Group Evaluates Federal IT Spending Opportunities," says that the government sector is growing much faster than the private sector, but only in certain short-term areas. "Sectors like security and e-government are big areas in spending, but under the covers these sectors are only short-term," says Carrie Lewis, Yankee Group senior analyst, technology management strategies. "Things could easily change in the next 18 months with a change of administration on the federal level. So vendors must prepare for when these areas take a nosedive." The solution, according to Lewis, is for vendors seeking government contracts to create a balance in which they offer solutions for the hot-spot areas, but also offer IT infrastructure solutions. The infrastructure is where the long-term contracts are, according to Lewis. And the good news for CRM vendors is that government agencies are spending the most on getting their systems up to speed to more quickly and efficiently meet the needs of their constituents. Lewis says that the government sector is significantly behind the private sector in terms of CRM systems, as well as integrating ERP and supply chain management systems, thus the sustained investment. "On the federal level, the bulk of spending is on baseline IT infrastructures to get up to speed, basically setting CRM, ERP, and supply chain management systems in place," Lewis says. However, Lewis notes that more advanced CRM spending is taking place on the state level. "There has been more progress on the state level for getting that 360-degree view of the citizen," she says, pointing to projects like NYC's 311 program, which integrates information from various departments and agencies into one customer-facing entity. "Right now agencies are just looking for the nuts and bolts to help focus on improving their customer relationships--anything to help provide better services at a lower cost," Lewis says. All in all, according to Lewis, those vendors offering solutions that will help government agencies be more customer-focused will be best positioned.