Many IT companies that previously paid little attention to government contracts are now going to great lengths to attract government business.
Whether out of heartfelt patriotism in the wake of Sept. 11 or the desire to tap into the nearly $38 billion budgeted for homeland security spending in 2003, many information technology companies that previously paid little attention to government contracts are now going to great lengths to attract government business.
"If you put it in the context of commercial spending being down and government spending going up, it seemed to make good business sense to have different things in our portfolio," said Len Pomata, a former defense-contractor executive who was recently hired to head up a new unit created by software maker WebMethods to target federal contracts.
The avid response of the IT industry to Sept. 11 coincides with one of the worst markets for computer hardware and software in recent memory. In the shadow of recession, businesses have slashed budgets for computers, software and other operational equipment. As a result, the revenue and stock prices of many software companies have plunged over the last year.
But government spending remains a bright spot. Even before Sept. 11, federal, state and local government spending on IT products constituted as much as $150 billion annually, or 20 percent of IT industry sales collectively, said Harris Miller, president of the Information Technology Association of America, an IT trade group in Arlington, Va.
Software companies big and small are sending tens of thousands of proposals to government agencies, some of which are so new they don't have the budget to hire people to evaluate them all.
"We can't move as fast as we'd like because of the sheer volume, and we don't have enough staff to move as quickly as we'd like," said Steve Cooper, chief information officer for the Department of Homeland Security and one of two officials in the department reviewing proposals in their spare time.
"There's good stuff in here that we want to get to," Cooper said.
One company is proposing that its customer-tracking software be used to track terrorists. Another says its applications that help business partners communicate could be used to help government agencies, such as the CIA and FBI, share information. Technology that tracks business cargo could be used by the government to track shipping containers at the nation's ports, which are thought to be particularly vulnerable to terrorists.
"There are probably many more ideas and proposals than the government could possibly consume or review, quite frankly," said Pomata, senior vice president for WebMethods Federal, a 15-person unit the company hopes will boost its federal business from 6 percent of sales today to 25 percent in two years. "The government is struggling to wade through as much information as they can."
Siebel Systems, a customer relationship management (CRM) software company, has been among the most active and outspoken in its appeal to the government's homeland security needs. Shortly after Sept. 11, the company created a homeland security business unit, which now employs 100 people, and announced it would build a set of applications geared specifically for homeland security.
The product, tweaked to track terrorists instead of customers and marketing data, was released in November and is already being used by the newly created Transportation Security Agency to screen employees.
Patriotic fervor runs high at Siebel, which draped a nine-story-high American flag from its office in Emeryville, Calif., in the wake of the World Trade Center and Pentagon attacks. Chief Executive Tom Siebel has advocated the marriage of technology and homeland security needs at numerous conferences and before a congressional committee. At one point the company ran full-page newspaper ads asking, "Who are the Mohammed Attas of tomorrow?" next to a photo of the alleged ringleader of the Sept. 11. hijackings.
"Tom Siebel is passionate. He is on a mission to do something really historic for the country," said Matt Malden, vice president of homeland security at Siebel. "We are doing something that is going to revolutionize the effectiveness and productivity of government investigative agents."
Those kind of bold aspirations, rare since the days of the Internet boom, are being echoed across the industry at dozens of homeland security technology conferences and in press releases and white papers.
One of the first proposals out of the gate was from Oracle, which built databases for the CIA when it started up nearly 25 years ago. Almost immediately after the Sept. 11 attacks, Chief Executive Larry Ellison began calling in television interviews and newspaper op-ed pieces for a national identification-card system. By December, Oracle had donated its 9i database management software to a U.S. government agency for national security.
Oracle is also teaming with Sun Microsystems, Electronic Data Systems and PwC Consulting to help the Transportation Security Agency and other federal agencies adopt biometric technology to assess security risks of airline passengers and airport employees.
Wall Street analysts are braced for yet another wave of earnings shortfalls and are not expecting the market to improve until well into next year or even later. Hurt by the downturn, companies may view wartime government spending as a lifeline out of the business-spending-led recession. In addition to the $37.7 billion slated for homeland security, President Bush's 2003 budget calls for another $52.6 billion for federal IT procurement.
Critics contend that Siebel and others are shamelessly attempting to capitalize on a national tragedy.
"I'm concerned that this is the beginning of a stampede to the feeding trough for companies looking to boost their market prospects without caring about selling something to someone that's genuinely useful," said Joshua Greenbaum, a technology analyst and head of Enterprise Applications Consulting in Daly City, Calif.
Siebel's Malden denied that, saying they've put their "best and brightest" employees on homeland security, now considered the company's top priority.
"We're not doing it for the money," he said. There are no revenue targets for his unit, he said, and success would be defined in terms of stopping terrorist incidents. "The driving and motivating factor is doing something incredibly important."
Trial and error
Back in Washington, congressional leaders and the White House are revving the tech engine. Numerous hearings and forums have been held to discuss security-related technologies available to the government and bills have been introduced to amend federal policies to streamline acquisition procedures for homeland defense technologies.
It can all be very daunting for companies that haven't dealt with the government before.
Take Sonic Foundry, which usually sells products for editing, storing and searching video and audio files digitally, but got a government contract for security products after creating a new biometric identification data analysis product.
"The federal government is a very large ball of string that needs to be continuously unraveled to find the right ways into it," said Chief Executive Rimas Buinevicius. "Agency rivalry is a big issue. A number of things have to be solved before we get to the nuts and bolts of implementing solutions."
And for all the clamor, few big projects have been approved and there is little real action on the government's part, according to Keith Rhodes, chief technologist at the U.S. General Accounting Office, an investigative arm of Congress that examines the use of public funds.
That's because the charter of the Department of Homeland Security is still being debated in Congress. Until that department is established, agencies are hesitant to move forward with big technology initiatives independently in the midst of what has been billed as the biggest reorganization in government since World War II, Rhodes said. He predicts IT decisions related to homeland security may be pretty slow going for the rest of the year.
"Until people have a higher understanding of what homeland security is, it will be hard to verify (the) veracity of any proposals," said Rhodes. "I don't know of anyone that has a blank check."
The bigger challenge facing the government, however, is coming to grips with the many complex interdependencies of the problems they are trying to solve and how technology fits in. For instance, the Transportation Security Agency could spend billions to install biometric identification technology in all the major airports, but if the system is tied into a flawed database at the Immigration and Naturalization Service, then it does no good.
"If you haven't defined your question properly, the introduction of technology is only going to get you a wrong answer faster with a greater degree of precision," said Rhodes. "You will only be misled faster."
Others worry that large sums of money will be wasted as the more than 30 federal agencies involved in various aspects of homeland security throw technology at problems that can only be solved by organizational and cultural changes within the government.
That's a lesson that businesses have learned over and over again in their effort to become more efficient and customer-friendly by implementing business applications from companies like SAP, PeopleSoft, Oracle, i2 Technologies and other big software companies. Untold numbers of companies, including Nike and Hershey Foods, have lost millions of dollars in failed software projects.
And the government is more likely than its counterparts in business to get tripped up on technology, observers say.
"The government is not very good at evaluating the technical merits of information technology. That's compounded by the fact that it has a strong sense of urgency about a mission that as of today is not very well-defined," said Loren Thompson, chief operating officer of the Lexington Institute, a nonprofit public policy research group in Arlington, Va. "You have all the ingredients for a lot of money being wasted."
Rhodes acknowledges the rush to fix complex problems "does have fraud, waste and abuse written all over it." That's why he plans to be deeply involved in approving major projects and auditing them later on.
"Everybody (in the IT industry) does see this is as an opportunity to find a new revenue stream, which is not a problem," said Rhodes. "But we want to ensure the money of overburdened taxpayers isn't going to be wasted on an opportunistic boondoggle."
As the former CIO at Corning, Cooper is aware of the risks and said he's working to avoid such pitfalls and wastes of public resources.
"We need to spend and invest taxpayer dollars very wisely, and shame on us if we get that wrong," Cooper said. "We should be held accountable."