It should have been no surprise to informed observers, but the federal government’s announcement in early August that it will create a shared services bureau and consolidate IT procurement and services government-wide will have wide-reaching implications for channel partners that have built their businesses around selling to the feds.
After several false starts over the years around IT procurement and service delivery reform, the government announced plans to save between $100 and $200 million annually, a cut of between five and 10 per cent of IT spending, by creating Shared Services Canada within Public Works and Government Services. E-mail networks will be consolidated, data centres reduced and department networks streamlined. Many savings will come from reducing redundancy and duplication; for example, pockets of Lotus Notes and Novell Groupwise users remain in government.
“The operation of multiple e-mail systems across the government also means that departments are negotiating and maintaining separate licenses, and have their own technical support teams in place,” the government said in a release. “This duplication is very costly, and unnecessary.”
Details are still emerging on how procurement and service delivery will be impacted by the reforms, but it seems likely deals will be bigger and government will look to be more strategic in its use of IT. Some 44 government departments and agencies out of over 120 are onboard with shared services so far so there will still be some point departmental opportunities for partners, but by and large the era of simply watching Merx for RFPs may be ending.
If partners aren’t ready for the new reality they have only themselves to blame said Kelly Bizeau, president of MarketWorks, a channel-focused public sector development firm in Ottawa. The government needs to get better value for its IT dollar, and she said shared services is a direct result of channel inefficiencies.
“I have no doubt smaller partners will be impacted, and that’s what happens when you don’t listen to your customers,” said Bizeau.
The problem, said Bizeau, is that many public sector-focused resellers haven’t made the transition the rest of the channel has from box-pushing and contract-chasing to becoming a trusted advisor and working with customers to add value around services.She notes the government tried to go down this road in 2005 with “The Way Forward”, but put on the breaks after the IT industry “screamed blue murder.” Roundtables with vendors and resellers followed, but she said the channel didn’t get the message that things had to change.
“We live in a very reactive industry, and because government has historically had so many initiatives fail because it’s such a political beast, our traditional government VARs have become really complacent,” said Bizeau. “There’s no other market as underserved in the IT channel as the government of Canada. You don’t see this in health and education; you see robust solution providers offering solutions.”
For those partners that can change, Bizeau said opportunity will remain. But they’ll need to be proactive, working with departments to help define their needs and shape contracts rather than bidding reactively. With deal sizes likely to grow through, smaller partners will need to add scale to remain in the game.
“There’s still an opportunity if they’re willing to navigate the new terrain,” said Bizeau. “It won’t be as easy as it has been in the past, but nothing good is ever easy.”
One partner that saw the shared services train coming and has already jumped onboard is Ottawa’s Nisha Technologies. The PC, notebook and workstation reseller has been busy expanding its software and services offerings, adding capabilities around virtualization and security, as well as offering contract workers from project executives to project administrators.
“It will really narrow the competition and I think the industry has been aware that this was coming for quite some time; I don’t think it’s a surprise,” said O’Leary. “If companies have taken a proactive approach and aligned or expanded their portfolio of products and services to respond to the Shared Services Canada mandate there shouldn’t be a problem. They’re the customer, they’ll define their requirements and either you change with them or you’ll find the doors closed.”
It will be hard for smaller companies to compete on the scale necessary, she said, and they may need to partner with larger players. Government will suffer to a degree too though, she added, as smaller firms have often been more responsive to service requirements than larger companies, for example.
“I think Nisha Technologies is will positioned to respond to the federal government requirements in the way we’re moving forward. We’ve expanded our offerings and we have some excellent strategic partners we’ve been doing business with for quite some time,” said O’Leary. “Working together with them and continuing to monitor the heartbeat of Shared Services Canada, we’ll be able to respond quickly to their requirements.”
While the future is still a little murky and the government’s IT spend is likely to shrink, the federal government will remain a large purchaser of IT products and services and the channel will adjust said Rick Reid, president of Tech Data Canda.
“There will still be a requirement to procure and supply products and services, and there will still be a role for VARs and distributors in that community,” said Reid. “We’re resilient; we’ve been through these situations in the past and we continue to thrive.”
Reid noted that many resellers that have dealt with the federal government in the past have already re-engineered themselves into service-focused partners, and he sees that trend continuing.
“Smart resellers will continue to grow and find new ways to supply product,” said Reid.
Follow Jeff Jedras on Twitter: @JeffJedrasCDN.