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.

A Tale of Two Subject Lines

photo_Allan-Rubin_65x85by Allan Rubin, Vice President, Marketing

I noticed an interesting juxtaposition of subject lines in my (overflowing) email in-box today.

Early in the day, I saw this message from Defense Systems:

DISA collaboration tool doubling its capacity

The top story was summarized as follows: “The enterprise collaboration tool known as Defense Connect Online is about to double in capacity as users seek less expensive ways to conduct meetings and training in austere budget times, reports DISA.” The piece caught my attention as it signaled recognition of the inevitable: government employees are finding new ways to communicate and collaborate since they can’t travel in person.

Not long after, I received a message with this subject line:

Latest Conference Cancellations & Postponements on GovEvents

 This email from GovEvents.com led with the following summary, which serves as a continuation of my last blog post on a similar topic:

I think GovEvents.com is a great tool that provides a valuable service to the community (if you don’t use it, you should). It just struck me as significant that a company which promotes government events led its outreach effort with a message about…the cancellation of government events!

We all know travel budgets and other restrictions are hammering the marketing media mix. We see today that our DoD customers are doubling their capacity to host their meetings, training sessions, and other communications virtually to cut costs and minimize scrutiny from ethics officials and their superiors.

What does this mean for government marketers? Should we be investing more in online media, virtual events, webinars, and the like? Face to face communication will never be replaced, but what will place a close second?

The more important question is: where are you placing your bets?

We’re continually looking into new avenues to help our manufacturers and channel partners reach their government customers. I’d love to hear from you about how your plans are changing.

House Committee Approves Bills to Lock in Travel Spending Cuts

by Allan Rubin, Vice President, Marketing

Yesterday Government Executive reported that the House Oversight and Government Reform Committee approved, and sent to the House, two bills targeting excessive government spending. The actions aim to cut agency travel spending by 30 percent with a particular focus on travel to conferences.

An amendment added more teeth to this request. The amendment would restrict agencies from paying travel expenses for more than 50 employees to attend a single international conference (unless they are approved in advance by the Secretary of State). Further, it requires each agency to post on its public Web site each quarter the details of any travel expenses paid for conferences during the previous quarter.

Personally I think the Secretary of State has more important things to do than sign off on travel requests. But my larger concern is with the increased scrutiny around individual travel details and the chilling impact it will have on demand among prospective attendees of government conferences and events. Since the details emerged from the GSA conference scandal, it seems that any government employee who wants (or needs) to attend an event in another city has to sign away his or her life and risk public humiliation, not to mention career growth, just to get approval.

Is the government over-reacting here? More importantly, will anyone in government have the appetite to go through the approval process (or face the risk) to attend any of the events at which we promote our products and services? Will they be discouraged from attending local events too? Or have those become an even more important tool for marketing professionals?

We’ll be following this bill as it winds its way through the House. And as always, we’re watching our attendance rates to see if our marketing ROI has been (or will be) impacted by these continuing changes. I urge you to do the same.

Conference Spending Cuts Continue: Six Tips for Marketers

by Allan Rubin, Vice President, Marketing

I predicted in a previous post that recent concerns with government conferences and travel would spill outside the responsible agencies and impact spending overall, making it more difficult for federal marketers to leverage events in their marketing programs. Those who thought the restrictions would be limited to events hosted by the government itself, or to specific recent offenders like GSA, should follow this topic closely and consider the potential impact on their marketing plans.

On Friday, the Acting Director of the Office of Management and Budget, Jeffrey Zients, released a memo to the heads of executive departments and agencies (not just GSA) regarding the efficient use of taxpayer dollars. Highlights include:

  • In FY 2013, each agency must spend at least 30 percent less on travel than in FY 2010 and maintain this level through FY 2016; savings will be used to increase transparency and investigate abuses, a detail that will likely make federal employees less eager to leave the office. Agencies have 90 days to report on proposed travel reductions and also must specify how they will make these reductions sustainable in their FY 2014 budget submissions.
  • Agencies are being directed to focus on expenses related to attendance of Federal employees at conferences sponsored or hosted by non-federal entities. Many of the new rules require approval for high-dollar spending and increased transparency of expenses.

This comes on top of the House’s approval of the DATA Act in late April, which includes a provision that would cap spending on nonmilitary travel to attend a conference at 80 percent of fiscal 2010 levels. And let’s not forget about proposed changes to ethics rules that could force contractors to face many of the same limitations previously intended for lobbyists.

If lead generation events are important to your marketing mix, here are six recommendations to consider based on our reading of these evolving situations:

  1. Stay Local – Federal employees are going to be less inclined to hop on a plane in this highly charged environment.
  2. Go On-Site – Give agency tabletop events another look. They’re cost-effective for everyone, and there’s no risk for an employee to attend an event held in his/her own building. immixGroup’s Agency Expo program can help you here.
  3. Keep it Simple – If you host your own events, avoid flashy venues or anything that looks or sounds over-the-top. Be conservative and stay on the right side of the lines or you can expect low registration and attendance numbers.
  4. Stick Together – Your prospects will be more comfortable attending events sponsored by multiple vendors to avoid the appearance of impropriety. Find one or more complementary vendors with whom you can co-brand your events and share costs. immixGroup frequently creates multi-vendor events and trade show kiosks to make this easier for our clients.
  5. Go Virtual – Targeted Webinars should play a larger role in your programs as agencies are explicitly instructing employees to turn to the Web to reduce travel costs. immixGroup offers several flavors of turn-key webinar programs for clients. The key is to make them relevant to your intended audience.
  6. Go with a Chaperone – Ethics rules favor events hosted by third-parties such as media companies and non-profits. We have seen tremendous success with these and can find or create events that fit your marketing plans and objectives.

To learn about any of these programs, contact your immixGroup account team or email me at allan_rubin@immixgroup.com.

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