Government & Industry Talk Cyber, Mobility & Big Data

Lloyd McCoy_65x85by Lloyd McCoy Jr., Consultant

Yesterday industry and government met during the Security Through Innovation Summit in Washington D.C. This forum brought together several hundred government and industry technology leaders to discuss technology verticals such as big data, virtualization, and cybersecurity. In addition to keynote speeches, breakout sessions allowed for a more intimate discussion of various technology developments. The FY 2015 budget was recently published and so the timing of this venue could not have been better. It proved valuable for fostering interaction with top federal C-level executives to gain insights into their priorities for the remainder of this fiscal year and the next.

Here are the top five things you should know.
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3 Big Opportunities in the FY15 Budget

Stephanie Headshot 65x85by Stephanie Meloni, Senior Analyst

With the unveiling of FY15 Budget requests this week, the news has been inundated with ominous (though not surprising) stories surrounding further reductions of forces within the DOD, terminations of modernization programs/acquisitions, retirement of aircraft, etc. The overall message is that DOD has been forced to stretch their resources in an increasingly complex threat environment.

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Opportunities in the Air Force

Rick Antonucci_65x85By Rick Antonucci, Analyst

The U.S. Air Force is a vast and sprawling organization that relies heavily on technology due to its unique mission. The Air Force’s base budget request for FY14 is $114 billion – 4% higher than FY13’s request (although actual apportionment may differ, depending on the impending omnibus) and the IT budget request is roughly $5.5 billion. The Air Force will likely spend close to that – somewhere around $5.4 billion, which represents a 2% increase from FY13.

Unfortunately its organizational landscape can be complex and even confusing making it difficult to find out where key people and organizations controlling these purse strings reside. It’s important to remember that the Air Force component offices all have unique requirements gathered by representatives from the Air Staff or Air Force Secretariat for the benefit of shared systems that are leveraged across the department. These shared systems range from HR, financial, and logistics systems to those involving networks and infrastructure, operational command and control, as well as cybersecurity. Shared systems and investments such as DEAMS, IPPS, GCSS, and AFNET bring requirements together from multiple disparate component organizations, but are centrally managed.

Learn more as we take an in-depth look at Air Force IT insertion points on January 23 at 2:00 p.m. to gain insight into:

  • How the new omnibus budget could impact IT spending
  • How responsibilities have changed across Air Force organizations
  • How to craft effective messaging to address Air Force’s technology challenges
  • What major technology requirements to expect in FY14
  • Which programs represent actionable opportunities for the IT product community

Don’t Call It a Budget (Yet)

Christopher Wiedemann_headshot-65 x 85by Chris Wiedemann, Senior Analyst

With the Senate passage of the two-year Murray-Ryan budget deal, President Obama is on course to sign the first budget resolution from a divided Congress since 1986. This has caused Washington observers and members of industry some relief, since it looks like we can finally plan for a year and a half of relative budgetary certainty (the bill runs through the end of FY15). In fact, much of the coverage around the bill has suggested that it has solved some of our recent problems, and many in industry – and the general public – are treating this bill as though it gives our customers money to spend for the next 22 months.

This bill raises the sequester spending caps, so once the process is finished the government will have more money to spend than they thought. Unfortunately, the process isn’t quite finished yet.

Most of the confusion here comes down to the difference between a budget – what we have now – and appropriations, the process that actually grants departments and agencies (DOD, DHS, VA, etc.) the money they need to operate and, more importantly, purchase new products. The budget bill that we just got sets a top line number for total federal spending in the rest of FY14 and all of FY15, but it doesn’t divide that money up among the various arms of the government. It now falls on the appropriations committees to allocate funds, and for their recommendations to be rounded up into a spending bill called an “omnibus,” which will outline spending plans department by department.

The good news is that both the House and Senate appropriations committees already have FY14 bills, and although most of them never saw the light of a floor vote, there is already a basis for funding allocations through the rest of the year.

The bad news (sorry if this sounds familiar) is that Congress doesn’t resume until January 2nd. Since our current CR expires on January 15th, that means lawmakers will have twelve days to roll up their draft appropriations bills into omnibuses, reconcile the House and Senate versions (which will certainly be different), then pass the reconciled version through both chambers. That timeframe probably means that some agencies will have to deal with another CR – so the final package will be something called a “minibus,” where some agencies get new appropriations, while others have to work with last year’s numbers again.

The upshot here is that we’re not quite at the finish line yet. Luckily the agreement we have covers most of the areas that cause arguments in Congress. The House and Senate are likely to have different ideas about which agencies should be allocated what, but brass tacks discussions like that tend to be less contentious – and again, there is already a baseline to work off in the form of the FY14 appropriations bills that didn’t pass. All of that adds up to clarity – so even if your customers don’t get new appropriations, they will be able to operate for the rest of the fiscal year without worrying about their funding levels changing. The picture starts to become even rosier when we look at FY15 appropriations. Since the framework for total spending is already in place, it’s very possible that we will have a real budget – 12 separate appropriations bills that all pass into law – for the first time since FY08. If that happens, it would really be cause for celebration.

Disparate Cyber Security Spending Projections Highlight Budget Ambiguities

Lloyd McCoy_65x85by Lloyd McCoy Jr., Consultant

IDC Government Insights recently released “Business Strategy: U.S. Federal Government IT Security Spending Forecast and Market Outlook,” a report which estimates that IT security spending will top $6.1 billion in 2014 and will climb 3-6% each year through 2017. This is in marked contrast to other projections made by industry and government.

immixGroup assesses the federal government will spend about $13 billion on cyber security in FY14 and will surpass $17 billion in spending by 2017. Cyber security spending includes IT investments that help protect federal networks, our critical infrastructure, as well as R&D efforts. Defense cyber security spending alone will account for $4.65 billion this fiscal year, dropping to $4.53 billion by 2017. Our projections are based on analysis of budget documents and federal cyber security programs, as well as official government budget estimates.

However, we acknowledge measuring cyber security spending is an inexact science. Even the federal government has had difficulty determining its cyber security spend. The total federal cyber security spend could in fact be higher than immixGroup’s estimates, as these figures do not account for all of such spending within major weapons programs. Adding to the uncertainty, a portion of cyber security monies are allocated to personnel and other line items that are not products or services related.

Despite these information gaps, we are confident the government will spend far more on cyber security in 2014 than the $6 billion predicted by IDC. According to our market sizing analysis, approximately 10-15% of the $13 billion federal cyber security spend will be dedicated to purchasing cyber security products. Thus the total addressable market for cyber security products vendors in FY14 will be between $1.3 billion and $1.9 billion.

The Government Marketing Shutdown

Photo of Allan Rubinby Allan Rubin, Vice President, Marketing

As the government shutdown continues into its second week, the effects for government marketers are coming into sharper focus. Over the past week and a half we’ve seen real-world examples of how this is impacting marketing plans across the industry. These include:

  • Trade Shows - As expected, these are either being postponed (like GEOINT 2013 Symposium and NextGov Prime) or cancelled altogether. GEOINT organizers noted that the recently-passed “Pay Our Military Act” allowed most Defense Department personnel to return to their jobs alongside the excepted personnel who were still working. However, it also included language making it impossible for personnel to travel (except in direct support of operational forces) or attend events.
  • Other Events – We’re seeing the cancellations and postponements extended beyond trade shows to include tabletop events, single-vendor events, user groups and others.
  • Date Conflicts – As event dates shift to the right, many are encroaching on other events planned for the same time periods, which will cannibalize attendance and increase competition for eyeballs (even within the same organization in some cases).
  • Promotion of Future Activities – Even if your webinar or event is supposed to take place in November or later, you still need several weeks of runway to promote it. Many Feds can’t check email or answer their phones, and those that aren’t furloughed likely have other priorities on which to focus. Don’t forget to review your promotional plans and adjust accordingly, especially as we creep closer to the holidays.
  • Government Speakers – Getting travel approval was difficult enough already. In addition to that headache, many Public Affairs offices aren’t open to approve speaker participation for upcoming or future events. Even if your likely speakers are still on the job and have approval, they’re likely unable to speak anyway as that won’t be considered an “essential” function.
  • Messaging – Try getting a word in edgewise with PR, social media, and content marketing…all anyone wants to talk about is the shutdown, which crowds out every other message we’re putting out there. Once your prospects return to the office, they’ll be focused on catching up on several weeks of work that were missed. Getting their attention will be more challenging than ever, and it’s likely to take more time and effort.
  • Paid Media – Many print, radio, and online ad campaigns are already running and can’t be undone.
  • Sales Follow-up – One silver lining with the shutdown’s timing is that not many marketing campaigns take place in September. However, for those with longer sales follow-up cycles, it will be harder to reach recent attendees to try to pour names into your pipeline and document ROI.

We don’t yet know how long this will continue, so what’s a marketer to do? Here are a few ideas:

  1. Focus on DoD First – Not everyone is there, and those that are may not be interested in talking right now, but civilian agencies will be hit harder and take longer to dig out when they return.
  2. Contact Event Organizers and Speakers – Make sure you understand how the shutdown is impacting those events for which you’ve made a commitment, how promotional plans will be adjusted, whether speakers are still planning to participate, and what recourse you have if things don’t progress as planned.
  3. Adjust Your Plans – Analyze your annual campaign calendar, upcoming email blasts, and budget, all with an eye towards minimizing lost value or creating campaign overlap/conflict in the coming months.
  4. Clean House – It’s always difficult to take the time to close out old campaigns, perform list maintenance, and summarize the results of what you completed last month. Catch up on best practice articles, see what the competition has been up to, and join those social media groups you haven’t had time to think about. Now might be your chance.
  5. Engage with Channel Partners and Systems Integrators – Many of them have extra time on their hands right now, so it’s a great time to reach out and build relationships. Update them on your new products, value proposition changes, competitive differentiators, changes to marketing plans, etc.
  6. Do Your Homework – Any down time you may experience today can be used to make tomorrow’s activities more effective. If you subscribe to GovWin IQ or a similar service, do some research now to ensure your upcoming plans are as targeted and relevant as possible. If you’re an immixGroup client, make sure you tune in to watch our upcoming FY14 Market Intelligence Budget Briefings, and use the information to build and review territory plans with your sales team.

During times like these, communities like ours need to pull together. Please post your own ideas or thoughts on how we as government marketers can all get through this man-made crisis and emerge stronger when our customers re-open their doors.

FY14 Budget Highlights Cybersecurity Opportunities within DoD

photo_Lloyd-McCoy_65x85Lloyd McCoy Jr., Consultant

As you’ve heard from Mohamad’s blog post, the FY14 budget calls for the Department of Defense (DoD) to spend approximately $5 billion for cyberspace operations, up 20% from FY12. In an era of declining budgets and workforce cuts, there is bipartisan support for more cybersecurity spending which is good news for the technology industry.

Since the budget request’s release on April 10, we now know more about the government’s cybersecurity plans in the next fiscal year. The FY14 budget reorganizes some existing Pentagon cyber assets into teams specializing in critical infrastructure protection, cyber defense, and cyber offensive operations. These units, scheduled to become operational this year, will operate under U.S. Cyber Command (USCYBERCOM). The move reflects growing concern about our cyber vulnerabilities and seeks to correct a previously disjointed approach to cybersecurity. Furthermore, increased staffing and support for USCYBERCOM is a major step forward in its path to becoming a Unified Command which would give it greater authority and responsibility. These efforts coincide with Administration efforts to increase the overall size of the cyber workforce. USCYBERCOM has traditionally had the mission of directing cyberspace operations and offering guidance, but is granted no funding authority, and with increases in cyber budgets and more focus being placed on cybersecurity, funding may start to flow through USCYBERCOM within the next year or so.

What does this mean for you? Besides there being more personnel devoted to cybersecurity and a more unified cyber strategy, expect increased spending on tools that detect weaknesses on classified and unclassified networks, and solutions which both defend our critical networks and proactively respond to threats in kind.

In addition to these tools, information sharing is another growth area within the DoD cybersecurity budget. The White House calls for increased funding in establishing an all-inclusive cybersecurity information-sharing system. Some components of this plan include:

  • Manage the Federal Enterprise Network as a single network enterprise with Trusted Internet Connections
  • Deploy an intrusion detection system of sensors across the federal enterprise
  • Pursue deployment of intrusion prevention systems across the federal enterprise
  • Connect current cyber operations centers to enhance situational awareness

We do not expect the cybersecurity budget to drop off in the near future meaning opportunities will abound. Furthermore, due to the embryonic state of DoD’s cyber workforce and infrastructure, DoD officials are looking to industry for ideas and guidance. See this is a chance for industry to help shape future buying decisions. The budget request still needs to get past Congress in order to become law. Neither the House nor Senate, however, has shown an appetite for cutting cybersecurity spending. Therefore, while some details of the President’s request will change you can be sure there will be more opportunities in cybersecurity programs than in previous years.

President’s FY14 Budget Request Would Add to Deficit but Bolsters Cybersecurity Spending

photo_Mohamad_65x85by Mohamad Elbarasse, Analyst

In a recent webinar, analysts at Bloomberg Government (BGOV) began what will inevitably be the first of many dissections of President Obama’s FY2014 budget request. The request asks for $3.8 trillion in spending for the next fiscal year. The deficit would be $744 billion next year, with deficits continuing for the next decade.

When compared to the enacted spending amounts from FY2012, many agencies will be seeing a cut in base discretionary spending under Obama’s budget, including USDA, HUD, and Labor. It would initially seem as though the Department of Justice would be facing a whopping 40% decrease in base discretionary spending, but the researchers at BGOV aptly point out the discrepancy is largely due to a change in accounting regarding asset forfeiture and the Crime Victims Fund. Agencies such as Commerce, Energy, VA, and NSF will see increases in their spending requests.

Cybersecurity is one of the few areas enjoying bipartisan support and increased funding in FY2014. The budget outlines $4.7 billion for the Pentagon for cyberspace operations, significantly more than the $3.9 billion it intends to spend on cybersecurity by the end of FY2013. This funding request represents the President’s and the Pentagon’s desire to build out the government’s offensive cyber capabilities. The budget request also asks for $300 million more when compared to the FY2012 number for DHS and a 22% bump for the VA, so the two agencies can further enhance their cybersecurity efforts.

While the federal government is curbing spending, it is no longer treating IT, specifically cybersecurity, as expendable. We can expect another debt ceiling debate this summer and hopefully legislation ending the federal government’s financial gridlock before the August recess.

Shielding Yourself from Sequestration

photo_Chris Wiedemann_65X85- one postby Chris Wiedemann, Senior Analyst

If you had a chance to view immixGroup’s Market Intelligence briefing on sequestration yesterday, you hopefully have a better understanding of what the proposed cuts mean to IT companies.  Tim Larkins summarized the history of this situation – what sequestration is, when it became law, and just how those cuts (which weren’t really supposed to happen) actually arrived. He also covered some of the projected long-term impacts of sequestration on federal spending. This information is all vital – it will help you understand your customers’ pain and better equip you to discuss the cuts they’re experiencing.

Today, though, I want to take a minute to reemphasize some of the key components of Tim’s presentation: what does this mean for federal sales? The “snowquester” is actually a pretty good metaphor for the impact of these spending cuts on the federal IT market: some segments will stay pretty dry, while others may well get buried. So what should we be doing to shield ourselves from sequestration?

First and foremost, when you’re finalizing a deal with your customer, make sure the money is there. That means asking your customers two questions: what activity account is funding the purchase, and is the right amount of money in that account? Remember, while program people are creating demand, they have to request that money be transferred from Treasury into the right activity account before they can actually buy anything. This is the step where the sequestration cuts are actually taking place – think of them as a leak in the cash pipe. That leak could mean that money intended to purchase your products is actually getting lost before it ever lands in the right activity account. Don’t forget: unless you and your customer both know 1) which account is funding a purchase, and 2) whether that account contains the right amount of money, you’re subjecting yourself to potential delays and hang-ups down the road. You might even not get paid.

A few more points that I want to emphasize:

  • Although the long-term impacts of these deficit cuts will probably be minimal, we are going to feel the pinch in the short term. Federal IT spending will decrease overall this year, particularly in DOD, where they have been spending as though the sequester would not be implemented.
  • Most of the cuts to IT spending will probably be felt by systems integrators and services contractors, both large and small. All the language coming out of OMB and other government sources indicates that there are many duplicative or otherwise unnecessary IT services contracts that will probably be descoped (or cancelled outright). This is bad news for small business subs on large contracts, but is actually good news for the COTS community, since government will need to buy more tools to perform the tasks that they used to outsource.
  • Keep your audience in mind. At the executive level, demonstrating cost savings and value is going to be more critical than ever – if you can’t demonstrate real ROI within two years of purchase, your customer likely won’t be interested.
  • At the end of the day, there is still a mission that has to be met, and government customers won’t be able to use sequestration as an excuse not to do their jobs. If you or your clients can help them meet that mission, you will still find a willing audience.

As always, if you have more specific questions, I urge you to reach out to the Market Intelligence team. Good luck and happy hunting.

Reloading Your Federal Marketing Toolbox

photo_Allan-Rubin_65x85by Allan Rubin, Vice President, Marketing

My mother likes to complain that my father takes tools from the toolbox and doesn’t replace them, leaving her with a handful of nails and no hammer to drive them. Frustrating, right?

Marketers trying to attract the attention of government buyers face a similar dilemma: tools are getting taken from our tool kits and not replaced. Since my last posting about government event cancellations, we’ve heard of at least two more: the Department of Homeland Security’s 6th Annual Industry Day and DIA’s Defense Intelligence Worldwide will not take place.

Traditional media sources continue to struggle, with editors and reporters being downsized and print magazines continuing to consolidate. The impact of Sequestration cuts on major contractors and systems integrators is unlikely to help this trend as marketing budgets will surely be hit.

Those of us who are active in lead generation (via phone campaigns, email blasts, and events) will surely see conversion rates take a hit as furloughs kick in. What’s the best day or time to call or email someone if they’re not working that day? Will ongoing furloughs, downsizing, and political fights over giving a meager 0.5 percent pay raise break their spirits and drive them out?

Today’s blog post in FedConnects raised a few interesting questions. Among them:

How will government address the need for civil servants and military and intelligence workers to stay abreast of new technologies, innovate and collaborate in order to increase efficiencies and ensure productivity?  As part of President Obama’s Open Government Initiative, we are supposed to be operating under an open government mandate that encourages less siloing, more sharing of services and innovations.

How can true transparency and efficiency be achieved if government is restricting collaboration and opportunities for government leaders and industry to share ideas and work on problems?

If your organization relies on you to create demand in the public sector, it’s time focus on finding new tools to supplement the old ones. Will virtual events play a role as live conferences drop like flies? What role will associations play in educating our customers? How about social media driven information sources like GovLoop and Federal Technology Insider? I think it’s time to work some of these into your public sector marketing budgets, in addition to the targeted, local, and low-key events that were highlighted in Market Connections’ recent study.

Speaking of tools, we have a few that can help you make sense of Sequestration and the ongoing budget mess. Our Sequestration Resource Guide provides our take on how to deal with the pending cuts and also points you to market intelligence resources that can help. In addition, we’ve already had hundreds of IT sales and marketing professionals register for our upcoming webinar on Sequestration and the Federal Budget.

With so many tools vanishing these days, make sure you re-evaluate and take advantage of the ones that are left.


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