Service-Based IT Switches Up Feds’ Vendor Relationships

Cloud computing has ushered in an emphasis on service-oriented, on-demand information technology in the federal market. The shift from acquiring hard assets, such as computers, servers and even mobile devices, as well as software packages installed on those assets, has been gradual. However, the process has reached a point that it requires more attention from the vendor community.

Beyond cloud technology — or sometimes allied with it — the service approach to data storage, Big Data, analytics and mobile device management is increasing, and vendors are being asked to change with the times.

Underscoring the significance of this change, the Professional Services Council is expanding its portfolio to align the its agenda with the shifting direction of the federal technology and professional services market.

The PSC, an association of more than 370 companies, represents small, medium, and large businesses that provide federal agencies with a variety of services including information technology, engineering, logistics, facilities management and consulting.

In early March, PSC created a technology policy committee in recognition of the “convergence taking place between both the technology and the professional services sectors, and the many issues associated with that convergence,” said PSC President and CEO Stan Soloway.

“Today, the lines that traditionally separated the two have been blurred almost to extinction,” he added. Anne Altman, IBM’s general manager for U.S. federal government and industries, will chair the advisory board for the new committee.

“This initiative was really driven by our members. Together, the more we talked about where the sectors are going and PSC’s unique role, the convergence dynamic became increasingly evident. There is fairly wide agreement that right now, there is something of a thought and advocacy leadership void in this whole area and we are uniquely positioned to help fill that void,” Soloway told the E-Commerce Times.

“The move to an ‘as a service’ business model, or what others refer to as ‘consumption-based buying,’ is changing the face of the government marketplace,” said Soloway.

Consumption-based acquisition refers to obtaining IT capabilities through a network, similar to the utility service concept for obtaining electricity. It includes a variety of applications including Software as a Service, Infrastructure as a Service and Platform as a Service.

In the “as a service” mode, “customers use applications that the provider supplies and makes available remotely, on demand, rather than using applications installed on a local workstation or server,” the Congressional Research Service said in February 2014 report on federal IT.

To further explore the growing impact of service-based IT at federal agencies, the E-Commerce Times spoke with PSC’s Soloway; George Newstrom, president of Dell Services Federal Government and a member of the new PSC committee; and Stacy Cleveland, director for ITO portfolio management at HP Enterprise Services for the U.S. Public sector. HP is a member of PSC.

E-Commerce Times: From PSC’s perspective, what are the two most pressing procurement and acquisition issues that you see related to the “as a Service” convergence?

The move to “as a Service,” or consumption-based buying, has a wide array of implications and creates very different dynamics for differing portions of the sector. The first and foremost issue is developing real-time, effective workforce development tools for both industry and government to help them better understand both how the concepts are different than what we are all used to — and, more specifically, [providing] learning opportunities to help them better understand how differing sectors’ requirements might drive variations on the theme. The pace of technology change is so fast [that] the acquisition system struggles mightily to keep up with it.

Related to this is a need to really think through the ways in which the government customer is organized and resourced from a human capital perspective. It’s not just a training issue, but also a question of whether government components have the right combinations of business and technical skills to develop the right kinds of requirements — and from them, the right kind of business strategy. In addition, convergence is not just a matter of IT and professional services. It is a reality across the board, including not just IT, but more broadly, mobility, Big Data and more.

ECT: Has federal IT contracting morphed into a service orientation versus just selling computers, servers, tablets and so forth, especially with cloud, Big Data and mobility in the forefront?

Yes. As more government leaders understand the benefits of acquiring IT as a Service, versus acquiring the components of solutions, they increasingly seek these consumption-based services for compute, analytics and mobility. Interestingly, buyers are looking to commodity, even utility-style, purchasing models for answers in buying “as a Service” offerings.

Although the government benefits from controlled and lowered costs and increased agility, the new challenge becomes managing and governing the on-demand nature of these services and costs. As government leaders explore these solutions, they will need to take different approaches to validate the challenges they will face in deployment, adoption and acquisition. In addition, they will also need to anticipate the potential returns.

George Newstrom: In many ways, federal IT has [moved to a service orientation] depending on the size of the agency, its existing IT resources and its IT needs. It’s impossible for customers to know the full scope of what’s available to them — or even know the best practices of how to integrate many IT tools and solutions. In today’s budgetary environment, it’s important for government entities to have the ability to quickly scale as needed — which can be important not only for IT solutions and infrastructure, but also for supporting IT staff.

Having a services partner is a key tool for government customers that helps them stay agile and optimize their IT to not only meet the operational needs of their organization but also [serve as] a tool that helps to balance those needs with the specific and often unique regulatory requirements of government organizations.

ECT: Are there significant concerns among vendors that conventional IT procurement mechanisms such as the General Services Administration schedule, or various Blanket Purchase Agreements with Indefinite Delivery Indefinite Quantity orders, are insufficient acquisition mechanisms for the “as a Service” concept?

Some agencies with less complex Infrastructure as a Service needs have been successful in using GSA Schedule 70 and IDIQs. At recent ACT-IAC government-industry discussions, it was clear there are some agencies that have found a path forward using current acquisition tools and processes, while others are stymied. Government acquisition professionals and program managers need to understand the technology and business model nuances to fully address the challenge of evaluating, purchasing, managing and adopting these services on a cost-effective basis.

Acquiring these services is less of a technology challenge than it is a business model challenge. Business models are challenged when the government enacts requirements that are outside of what the industry can price and offer economically. Also of concern is the ongoing management of resources and risk between vendors and government.

Government acquisition processes were not initially created to accommodate on-demand responsiveness. In addition, current mechanisms do not provide a framework to continuously describe acquisition requirements or a way for industry to address constantly evolving, often customized requests that take a long time to execute.

Many government clients add specialized requirements to what started as commercially available services. This erodes potential savings, adds to the cost of delivery, and may add complexity to the offering. In addition, it can confound risk and return while making administration more difficult. As a result, vendors must build in costs to accommodate this complexity, uncertainty and risk.

Newstrom: The most significant concern with this model is not treating the process as we have treated government IT procurement in the recent past. Services-based engagements and solutions cannot be judged solely on a cost basis. There are very real and systemic benefits to these new platforms and services, but all are not created equal.

Government customers must be wary of this dynamic, and forcing them to choose based primarily on cost gives them limited latitude to judge the breadth of a platform they’re looking to adopt. Clearly, cost is a significant concern and needs to be among the chief factors when making a decision — but in today’s environment, it simply cannot be the overriding factor.

ECT: Which elements of the federal procurement process need to be addressed here — like Service Level Agreements, ROI calculations, or vendor qualification statements?

The main benefit from an “as a Service” model is as-needed access to standard services, with the ability to select various tiers of service at a predictable cost. For government, the ability to fairly evaluate these services is of prime concern.

However, this evaluation is difficult, as services are not typically described in a way that allows for an apples-to-apples comparison. This challenges the government’s ability to fully understand the services that will be provided for the fee that is charged, today and tomorrow. In some instances, providers may not prefer to offer such transparency. These challenges, along with the difficulty of comparing these services to the current total cost of ownership, make ROI difficult to calculate.

As such, the standardization of requirements and insight into provider offerings will be critical for “as a Service” models to flourish in this market. Additionally, standardized service level agreements, particularly those that apply across agencies, and the standardization of providers offering components that allow easy comparison — and use of an ROI calculator — would also go a long way.

On a separate note, we also need to draw our attention to the management and use of resources. For example, while FedRAMP has provided a solid foundation for evaluating service provider compliance with security standards, there are no standard methods of measuring overall quality of service.

Newstrom: I think we’re headed in the right direction, but there is still some distance to travel. I think FedRAMP is a good start and a fairly good example of a standards process that can help to review, authenticate and generally certify a relatively new IT platform for government use.

The biggest challenge will be that there cannot be a one-size-fits-all set of standards for contemporary platforms and solutions. You cannot standardize requirements for the use and implementation of mobile applications in the same way you do for cloud, just as the different flavors of cloud cannot be held to the same standard.

It’s going to be a tremendous challenge, but one that vendors and customers alike will have to work together to find suitable standards for the myriad of IT tools available to us now and in the future.