Feds' commercial desires mark fundamental change in the market
- By Joey Cresta
- Dec 07, 2018
In 2018 U.S. federal government policy and budget aligned to amplify excitement around the long-promised application of private sector IT innovations to public sector missions. We began to see action as government policies such as the President’s Management Agenda and National Defense Strategy combined with a bipartisan budget agreement to send a clear message that government agencies need to embrace cloud operating models and explore new technologies to reduce costs, move faster and serve constituents more effectively.
In a prevailing movement that Technology Business Research calls Wallet vs. Will, the federal market’s pursuit of commercial IT represents a fundamental shift from traditional procurement models predicated on bespoke, costly and difficult-to-replace proprietary technology to a more agile model leveraging configurable off-the-shelf solutions enabled by open standards.
In the old model, prohibitive cost was the primary impediment to moving technology forward, driving top-down commercialization models out from the Pentagon, or the wallet holder. In the emerging model, the axis has flipped as technology is no longer the problem but rather the will of the humans interacting with technology has become the main obstacle to keeping up with technological advancement.
As technology moves forward at breakneck pace, government policy and regulations will struggle to keep up. Law as the codification of an agreed-to set of ethical standards remains woefully behind as society struggles with the implications of technology development on myriad issues, from a citizen’s right to privacy to warfighting.
In 2019 familiar market trends such as transformative M&A in the IT industry broadly and in the federal services market specifically will continue to reshape the market and create new disruptions. However, we believe that the continued ethical debate around emerging technologies, as much as who holds the innovative IP around those technologies, will help shape the competitive landscape in the years ahead.
Ethics at the cutting edge of IT will compel commercial vendors to consider brand risks of pivoting from commercial enterprise to public sector technology selling
The highly partisan political environment in the U.S. creates new challenges for commercial IT companies to overcome, particularly as they pursue expanding market opportunity to introduce their technology innovations to federal agencies. A non-exhaustive list of publicity around this issue in 2018 includes Google saying it would not renew a Pentagon contract after employees protested the application of artificial intelligence (AI) to analyze intelligence collected by drones; Microsoft employees calling out executives for betraying principles in exchange for profits in bidding on the U.S. Department of Defense’s (DOD) Joint Enterprise Defense Infrastructure (JEDI) program; McKinsey & Co. stopping work with Immigration and Customs Enforcement after employees complained about supporting the U.S.’ highly divisive immigration policy; and Accenture employees circulating a petition to end the company’s contract with Customs and Border Protection over similar objections.
These firms and their peers will all have difficult decisions to make as they weigh the pursuit of new revenue streams with the potential negative impacts on their brands. For geographically and vertically diverse firms, working on ethically sensitive applications of emerging technology with the Pentagon, intelligence and national security agencies could represent an unnecessary risk to brand perception. Brand and reputation are paramount especially for consultancies such as McKinsey, which has firsthand experience in the harm government work can do to a brand following the fallout from a scandal involving its work with corrupt politicians in South Africa. The potential damage extends beyond customer perception and into the critical area of talent management, as fresh talent with coveted next-generation IT skill sets will make employment decisions in part on a company’s ethical posture. High-profile involvement in ethically ambiguous government programs, amplified in the social media age, could sway this new generation of workers to choose employment at companies that opt not to work on controversial programs.
In a market heavily disrupted by commercial IT, this ethical dilemma could play to the strengths of traditional government contractors experienced in attracting the right kind of talent and insulated from brand risk due to a near-exclusive focus on working with government customers. While commercial IT providers are transforming the market today, what happens in 2019 will say much about whether the pendulum will swing back to an environment in which working through the federal pure play vendors may be the best way to participate in the market.
The above commentary is part of Technology Business Research, Inc.’s 2019 Predictions series. The full special report, available for download >here, also discusses the impacts of IBM’s impending acquisition of Red Hat and the continued consolidation of the federal market.
About the Author
Joey Cresta is public sector IT analyst with the market research firm Technology Business Research Inc.
Source : https://washingtontechnology.com/articles/2018/12/07/insights-cresta-2019-predictions.aspx