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New Federal procurement reform could lead to channel doomsday

The federal deficit could lead to consolidation and cuts to IT spending that would force significant channel changes

Upcoming federal government procurement reform may cut out the small and medium enterprise (SME) channel from selling and supporting IT initiatives to Public Works and Government Services.

At the Federal IT 911 event in Ottawa yesterday, Kelly Bizeau, president of MarketWorks Ltd., said the federal government will have little choice but to change the procurement process of IT products and services.

According to Bizeau, the government is facing a $50 billion deficit and mandates have been set to cut costs across all federal departments. Bizeau believes that the obvious first choice for cuts will be IT, since the existing federal government technology stack is aging and new solutions centred on virtualization, green IT and distributed computing would save the government millions.

“This is a 911 emergency and we as a community need to raise awareness to what’s going on,” Bizeau said.

While the new procurement reforms are not all known to Bizeau, she said she believes they may have a negative impact on the SME channel community. “Procurement reform is happening because of the $50 billion deficit and if you’re in a hole or not doing well you’ll streamline operations. If you’re losing $500 million in total costs because of the aging IT infrastructure the first thing you’ll do is streamline IT, and the government is going to come down hard on all departments and if it does go down the economy will continue to struggle and the IT channel will get hit,” she said.

Sean Costello, founder and president of IronGate Server Management & Consulting of Ottawa, finds the existing procurement tools and processes prevent his company from efficiently delivering products and tools that would save the taxpayers money.

An example of this is the procurement process on the audio/visual National Master Standing Offer (NMSO), which has consistently been denied the resources required to properly manage and service the clients and suppliers who are noticeably affected by its lack of maintenance. Challenges that IronGate face with this particular tool include:

*Missed and delayed updates to the approved/listed products, which prevents emerging and improved tools from being procured; some product lists are over 12 months old;
*Unreasonable policies with respect to exchange rates, in that bid prices are submitted in US dollars, converted using the exchange rate of the day, and then the NMSO price is held for months, with no consideration or floating adjustment to compensate for the actual realities of the world economies.

“For an audio/video standing offer in this digital communications era, it’s frustrating that such basic, fundamental AV tools have been excluded, based on the supposed or perceived mis-categorization of products or abuse of the program. This includes the Apple Macintosh line of video-editing and AV production systems, the digital media storage tools that are qualified to support the technical needs of the platform (as opposed to raw IT storage, used in the general ‘data storage’ arenas), and the digital I/O and digital processing cards and tools for handling video, audio and modern day communications efforts,” Costello said.

The fear is the SME channel, which has for years modeled its businesses after government procurement processes, may no longer be included, giving channel companies no choice but to consolidate, Bizeau said. “The rug may be ripped right from underneath them. Successful reform must include the SME channel community.”

Michelle Warren, market analyst for Toronto-based MW Research, attended the event and sees more consolidation in the channel’s future. “Not to ring alarm bells, but channel partners must continue to look for new and innovative ways to service existing clients, to source new ones and to raise their profiles. Luckily, we’re at a time when increasing a company’s profile has never been easier, with some of the tools available via social networking,” Warren said.

Shared Services and its role in PWGSC may compound the problem further, Bizeau said during her presentation at the Federal IT 911 event.

Bizeau said Shared Services is being turned into a competitor against the SME channel. Shared Services produced a video for GTEC that basically outlined its vision for PWGSC. Bizeau is in contact with Maurice Chenier, the CEO of Shared Services, in hopes of working on a platform that would include the SME channel.Warren added, an option to combat shared services may be to work with complimentary organizations in the SME channel. “Innovation isn’t just the responsibility of the vendor community – it also lies in how companies go to market and service their customers. Channel organizations, if they don’t look for new ways, run the risk of being acquired or shutting their doors. This situation is paramount,” Warren said.

Bizeau said that all this procurement activity will create a domino effect that will impact not just the channel, but distributors, the IT manufacturers and eventually Canadians.

Costello, who also attended the Federal IT 911 event, said: “Failure to acknowledge a changing landscape won’t stop the change from occurring, and it certainly won’t stop it from impacting you.’ If you’re not motivated to learn more and take action as a member of the Canadian IT community, then you certainly should as a Canadian taxpayer.”