IT budgets in the public sector have taken a beating since late 2010, with growth stalling due to defense cuts and budgetary turmoil throughout 2011. Several big vendors saw revenues decline, while a select handful adjusted their course in response to market conditions and managed to grow their top lines. TBR tracks 16 key players in this vertical on a quarterly basis, and our data and insight indicates that in 2011: • IT services firms serving the public sector realigned portfolios to follow the budgetary reprioritizations in the federal government’s IT spending; • Vendors were compelled to focus on margin performance in lieu of top-line growth through operational excellence and a focus on strong contract performance; • Some companies are looking beyond their core market in the U.S., hoping to leverage their capabilities to gain traction with international government clients as well as new clients in the commercial sector.

1. PROFESSIONAL SERVICES BUSINESS QUARTERLYSM
The Challenging Federal Technology Market:
Insights from TBR’s Public Sector IT Services Benchmark
TBR Webinar Series
Spring 2012
Original Webinar Date: March 21, 2012
Presenter:
John Caucis, Public Sector Practice Manager (john.caucis@tbri.com)
TBR
T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C .

2. TBR
Today’s Presenter
John Caucis
Manager, Public Sector Practice
Technology Business Research, Inc. (TBR)
Twitter: @jcaucistbr
2 The Challenging Federal Technology Market:
©2012 Technology Business Research Inc.
Insights from TBR’s Public Sector IT Services Benchmark

3. Key Takeaways: State of the Market TBR
2011 was a difficult year for IT vendors serving the public sector …
How have vendors been impacted?
The market environment in 2011 was hostile to
12 of 20 growth.
What was the state of the market and what were the
of vendors in the Public
headwinds to growth?
Sector Benchmark saw their How are vendors coping?
revenues decline in 2011
What is the outlook for 2012?
SOURCE: TBR PROFESSIONAL SERVICES PUBLIC SECTOR BENCHMARK STUDY
3 The Challenging Federal Technology Market:
©2012 Technology Business Research Inc.
Insights from TBR’s Public Sector IT Services Benchmark

4. Key Takeaways: State of the Market TBR
The tumultuous federal budget process and lower IT spending
restrained growth for most federal IT contractors in 2011
The series of continuing resolutions delayed spending
decisions and extended acquisition cycles.
Federal IT spending in FY11 was ultimately less than the
funding authorized.
Defense cuts and the draw-down of operations in Iraq
and Afghanistan also impacted top-line performance and
tempered vendors’ outlooks for 2012.
The Challenging Federal Technology Market:
4 ©2012 Technology Business Research Inc.
Insights from TBR’s Public Sector IT Services Benchmark

5. Key Takeaways: State of the Market & Growth Trends TBR
Growth data reflects how market conditions have grown
progressively more challenging since 2010
The Challenging Federal Technology Market:
5 ©2012 Technology Business Research Inc.
Insights from TBR’s Public Sector IT Services Benchmark

6. Key Takeaways in 2011: Vendor Actions TBR
Vendors are undertaking a number of measures to cope with the
challenging market environment …
• Enhance the business development processes.
• Portfolio reshaping
• Align portfolio and strategies with shifting federal spending priorities.
The Challenging Federal Technology Market:
6 ©2012 Technology Business Research Inc.
Insights from TBR’s Public Sector IT Services Benchmark

7. Key Takeaways in 2011: Vendor Actions TBR
Generate new revenue streams …
• Expand into adjacent and parallel markets; diversify revenue bases.
• Leverage acquisitions to enhance positioning and capabilities in areas
that will receive continued funding prioritization.
• Expand alliance ecosystems to enhance offerings in areas where
spending will be sustained or grow (e.g., cloud).
The Challenging Federal Technology Market:
7 ©2012 Technology Business Research Inc.
Insights from TBR’s Public Sector IT Services Benchmark

8. Key Takeaways in 2011: Vendor Actions TBR
And preserve margin performance …
• Reduce operational drag.
• Enhance contract delivery and performance.
• Minimize unprofitable activities.
The Challenging Federal Technology Market:
8 ©2012 Technology Business Research Inc.
Insights from TBR’s Public Sector IT Services Benchmark

9. TBR Scoring Summary: Scoring Performance & Ranking in 3Q11 TBR
Government-centric scoring leaders IBM, Harris and Accenture
tended to be the growth and margin leaders
SOURCE: COMPANY DATA; TBR ESTIMATES
The Challenging Federal Technology Market:
9 ©2012 Technology Business Research Inc.
Insights from TBR’s Public Sector IT Services Benchmark

10. Outlook 2012: Market Trends TBR
Growth in federal IT spending is expected to be marginal in 2012
(and likely again in 2013)
• The 2012 Federal IT budget request is $80.9 billion, up 2.7% from $78.8
billion in the 2011 budget.
• TBR estimates 52% of the spend will be civilian, rising 2.5% to 3.0%;
48% will be defense-related, with flat to 0.5% growth.
• Not all departments/agencies will see an increase; some are facing steep
cuts.
The Challenging Federal Technology Market:
10 ©2012 Technology Business Research Inc.
Insights from TBR’s Public Sector IT Services Benchmark

11. Outlook 2012: Market Trends TBR
Federal IT spending in 2012 will be focused on cutting costs and
doing more with the same (or less)
• Federal IT buyers will prioritize solutions that streamline and simplify
operations.
• Spending on new IT infrastructure will be limited.
• Growing interest in social media, mobility & analytics
The Challenging Federal Technology Market:
11 ©2012 Technology Business Research Inc.
Insights from TBR’s Public Sector IT Services Benchmark

12. TBR
TBR Public Sector Resources:
TBR Public Sector Professional Services Business Quarterly Reports:
• Vendor Reports:
o Northrop Grumman (Information Systems & Technical Services)
o Lockheed Martin (Information Systems & Global Solutions)
o General Dynamics (Information Systems and Technology)
o Raytheon (Intelligence & Information Systems, Network Centric Systems & Technical
Services)
o L-3 Communications (C4ISR & Government Services)
o SAIC
o ManTech
o Booz Allen Hamilton
o CACI
• End of the quarter benchmark also includes Harris IT, ITT (Defense & Intelligence
Solutions), KBR and NCI for scoring purposes only
• Public sector operations of commercially-
centric IT services firms in the benchmark:
o IBM Global Services o Unisys
o HP Services o Xerox Services
o Accenture
o Dell Services
o CSC
The Challenging Federal Technology Market:
12 ©2012 Technology Business Research Inc.
Insights from TBR’s Public Sector IT Services Benchmark

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