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FCW : August 30, 2016
AcquisitionMatters The federal government spent approximately $50 billion on IT in each of the past three fiscal years, according to Federal Pro- curement Data System totals for the Federal Acquisition Regulation Part 2 definition of IT. That makes IT one of the largest of the 10 categories of com- mon goods and services spending governmentwide. In fiscal 2015, that $50 billion in obligations broke out this way in six IT sub- categories: outsourcing $29.4 billion, hardware $11.5 billion, software $6 bil- lion, telecommunications $1.8 billion, consulting $1.2 billion and IT security $1.2 billion. Knowing how much government spends in categories and subcatego- ries is, of course, only the first step to getting more value for the procure- ment dollar. Next comes using the data to shape buyer and supplier behav- ior. That is what will make for better buying. The size and importance of the fed- eral government’s demand for IT should make it a significant and even favored customer of its biggest suppliers. But that requires getting federal spending and demand under management — two key category management levers. First, it’s useful to know general trends in government IT purchasing. For example, the number of transac- tions is down 44 percent between fiscal 2011 and 2015, the number of contracts is down 83 percent, and the number of suppliers has fallen 24 percent. At the same time, spending per transaction and per contract are up substantially, as is small-business spending. What does all that tell us? For one thing, government is using fewer con- tracts, using them more often and buying from fewer companies. That means fewer federal resources are being expended in creating subop- timal contracts, which saves money for vendors that don’t have to commit resources and time to win contracts that don’t deliver the estimated revenue. What’s more, the data reveals that consolida- tion has not hurt small companies. Re-examine the status quo It’s also useful to know the degree of crossover between government’s largest sup- pliers and the biggest play- ers in the global IT market. In software, for example, Microsoft and IBM are on both lists. But they diverge after that, with resellers and systems integrators providing the majority of applications and services, including Microsoft’s, to the U.S. federal government. That difference is evidence of sev- eral trends in the federal market: 1. Many major global software suppli- ers do not sell directly to the federal government. 2. As a result, agencies buy software primarily through resellers or systems integrators. 3. Agencies also tend to acquire hard- ware and peripherals through resellers and systems integrators rather than orig- inal equipment manufacturers (OEMs). As I have written elsewhere, resell- ers can add cost to IT hardware, ser- Howtobeamore effective IT buyer BY DAVID SHIELDS Armed with data on their spending patterns, suppliers and markets, agencies can manage their demand for IT and shape suppliers’ behavior August 30, 2016 FCW.COM 29 SHUTTERSTOCK 0830fcw_029-030.indd 29 8/9/16 1:34 PM
August 15, 2016
September 15, 2016