Deep Pockets -- State And Local Gov't Buys Into IT
Dec. 05, 1999 (VARBusiness - CMP via COMTEX) -- The government market can be extremely lucrative for VARs: Government agencies need to buy PCs, service contracts and scads of other IT equipment, and distributors and vendors are eager to work with resellers to get government agencies outfitted properly. So distributors and product manufacturers are ready and willing to work hand-in-hand with VARs, offering resellers special pricing deals. They do it, VARs say, because while it's not always easy to get into government work, once you're in, you're in. No one wants to turn away repeat business, and this market is a prime target for generating return customers.
In the information technology arena, state and local government agencies in the United States spent $41.93 billion in 1997 and $46.12 billion in 1998, according to research provided by distributor Ingram Micro Inc., Santa Clara, Calif. Add to that some $29.2 billion in 1998 federal government spending, and it's evident that there's a large pool of dollars that VARs can dip into. In fact, Tech Data Corp., Clearwater, Fla., projects that IT spending in the government sector will hit $100 billion in 2000.
Despite the obvious end-game benefits, entering the government market can be daunting, however. To the uninitiated, the bidding and request for proposal process can seem unending. In addition, there are sometimes confusing registration procedures and procurement policies. Still, VARBusiness research found in its 2000 State of the VAR Market survey that a significant number of integrators will focus on the government sector next year: 18 percent in the federal segment, 21 percent on the state level and 24 percent in the local market. Distributors can be a good resource for VARs selling to the government, because they have systems already in place that are designed specifically for dealing with government agencies.
Ingram Micro's Quick Start program is designed to give VARs jumping into this market the benefit of the distributor's experience in this segment. The distributor's book, Quick Start To Government And Education, provides an overview of the market and suggestions on how VARs can do business in state, local and education markets. (See "Tips On Entering the Government Market," below.)
Tech Data has recognized the importance of the government sector for 10 years. Some 7,000 VARs have ordered for some type of government contract through the distributor. Of Tech Data's $11 billion in sales, $1 billion, or almost 10 percent, is due to government sales.
"We've become more knowledgeable in the government market, and we do what VARs need to support them in the government market," says Don Bosse, senior manager of operations for the government group at Tech Data.
Some of what distributors are doing includes working with vendors to offer resellers better pricing and providing assistance in getting certifications that might be required to be eligible for various government contracts. In addition, distributors work to make special leasing and payment options available to resellers. Often, local governments are unable to pay a reseller within 30 or even 60 days after the project is completed, and the reseller, who has usually laid out money up front, can be treading on thin financial ice. Leasing and other financing programs from distributors can be lifesavers.
Selling to the public sector can be daunting. Tales of reams of paperwork and red tape can frighten the most industrious VAR. But, according to Bosse, much of that reputation is just carryover from the past. "People still think that working in the government sector is full of B.S., paperwork, long-term contracts. They couldn't be more wrong," he says, noting that the market is now more global, the process is more streamlined and is much more like doing business in corporate America. Distributors are also working to know what bids are out there even before the reseller calls them to spec out a system. That way, phone time is minimized, allowing the reseller to maximize its time in other areas. And that's another good way to put more money into the coffers.
Sidebar: Tips On Entering the Government Market Want to get going in selling to the public sector but don't know where to turn? One good beginning is Ingram Micro Inc.'s Quick Start To Government And Education. Here are a couple of tips from the guide, which is available at no cost to interested VARs.
- Visit Web sites of city and county governments as well as educational institutions in your sales region. A few to start with: www.nasire.org (the National Association of State Information Executives), www.naco.org (the National Association of Counties), www.r1site.gsa.gov/contracts.htm (GSA contract opportunities) and www.naeb.org (National Association of Education Buyers).
- Know how to write a request for proposal (RFP). Develop an action plan to create or improve a proposal-writing process. It should define the focus of required outcomes (such as: "Double the amount of goods and services sold to the government in the next 12 months"); assign responsibilities for various tasks; provide resources (including software, staff and funding); specify organizational structure.
- Understand that buying and selling in the government arena is different. In some public-sector bodies, there may be some 200 pages of rules and regulations that dictate particular agencies' procurement policies. -Jennifer D'Alessandro
By: Jennifer D'Alessandro
Copyright 1999 CMP Media Inc.
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