Tech firms look for best places to pitch security products

The opportunities are flourishing for the information technology industry to help protect the United States from threats. But as thousands of American tech companies answer the government's call for new ideas in the fight against terrorism, how many are getting their message to the right place?

Many in industry, and some in government, think Tom Ridge's Office of Homeland Security is the place. Others see the Defense Department as Security Central, with increasingly deep pockets. And others believe the best way to proceed is to piggyback on traditional government contractors. To varying degrees, they are all right.

But despite popular perception, going to Ridge's office may be the least effective, according to Phil Bond, undersecretary of Commerce for technology administration and Secretary Donald Evans' chief of staff.

"A lot of folks call me and say, 'Can you get me in to see Governor Ridge?'" Bond said in an interview. "That's not going to help them. They need to realize the Homeland Security Office is not a procuring office."

Bond's recommendation is to go directly to the procuring agencies, such as the Federal Aviation Administration, the Customs Service, FBI, Social Security Administration or the departments of Defense or Commerce. "[Businesses] need to keep their eyes set on procurement."

Bond said companies could go to his office to ask whom to talk to about a new technology. "We are fashioning ourselves as a bit of a portal," he said.

In recent years and increasingly since Sept. 11, some traditional government contractors have reinforced their focus on information technology at the same time that some commercial tech firms have been retooling themselves to provide services to the government.

Bond said the coming together of traditional defense contractors and the information technology industry that grew up outside government contracting "is just a reality." "There are all kinds of convergences going on," he said.

Bond said he is "bullish" on what the stronger emphasis on security means for the IT industry. "It means more cross-pollination between what were distinct industries," he said, which should enable the United States to remain at the forefront of the creation of high-value jobs.

The Defense Department is often thought to be the best place to look for a contract. But Jim Lewis, director of the technology and public policy program at the Center for Strategic and International Studies, said many IT companies have been deterred by the "hoops and ladders" required to contract directly with the Defense Department.

"IT companies decided that defense contracting is an arcane art," Lewis said. "Most decided it wasn't worth it."

At the same time, many traditional defense contractors decided it was not worthwhile to develop new technologies from scratch, and so have partnered with or acquired tech firms with specific expertise. Several large government contractors, such as Lockheed Martin, Raytheon and Northrop Grumman, have established themselves as IT companies, with a focus on systems integration.

Now that the defense market has "good money" in it, Lewis said, traditional IT companies should decide whether to try and get a piece of it. Some, such as Cisco Systems and Microsoft, are longstanding government contractors. Cisco provides the "nuts and bolts" of the system, such as back end routers and switches, which are used by the systems integrators, according to John Earnhardt, Cisco spokesman.

"To the extent that traditional IT companies can create the ability to act as defense contractors, they're going to get something out of this," Lewis said. "To the degree traditional defense contractors can remake themselves as IT providers and integrators, they will do better."

New government funding likely will be aimed at areas such as airport security and surveillance equipment, rather than traditional defense projects, said David Johnson, director of engineering management at the Aerospace Industry Association. IT-oriented defense contractors will pursue those contracts as readily as any other tech firm, he said.

Traditional defense contractors may better understand how to make technology products "more rigorous" to meet harsher defense purposes, Johnson said. But non-traditional tech firms may be able to produce products at a lower cost, though maybe not in high volumes quickly.

Johnson downplayed the "hype" that has surrounded the increased attention on security. "The change that's going to come out of this is not going to solve the problems of the dot-com bust," he said.

Dan Heinemeier, president of the Government Electronics and Information Technology Association (GEIA), said his advice to non-traditional government contractors is to "go partner with a company that knows this business."

While new funding will flow into existing programs at the federal, state and local levels, the new money is "not showing up on the street," he said. The government's focus is on upgrading existing systems, rather than building new platforms, he said.

GEIA does market analysis, such as forecasts of the defense and federal IT markets. In March, GEIA forecast that federal IT spending would rise progressively from $49 billion in fiscal year 2002 to $64.4 billion in fiscal 2007. GEIA is analyzing the fiscal 2003 budget proposal to see how the $37.5 billion for homeland security will be apportioned, Heinemeier said.

While big defense contracts are becoming fewer, subcontractors remain in high demand, a spokesman for Raytheon said. Some military contracts require the inclusion of small and disadvantaged companies. An example of an IT-related contract was one Boeing recently won to develop "future combat systems," such as 'smart cloth' with a microchip for soldiers.

Traditional defense contractors also provide IT services to civilian agencies. For instance, Raytheon is the largest contractor of the FAA's air traffic control systems, and develops its own software, the spokesman said.

Linda Gooden, president of the 7,000-employee Lockheed Martin IT, said that her company has been the biggest IT provider to government for the past six years. Since the company already was working on information security, the events of Sept. 11 simply served to prioritize those efforts, she said. For instance, the company has sped up its renovation of the Pentagon's infrastructure.

A Lockheed Martin spokesman said the company outsources technology development when it is cheaper to do so. The $25 billion company with 125,000 employees worldwide is one of the largest contractors across government. "We move more bits of data [for the U.S. government] in a day than all the cable TV systems combined," the spokesman said, adding, "We write more lines of code than Microsoft."

David Colton, vice president of strategic initiatives at the Information Technology Association of America, urged companies new to the defense procurement process to be patient. While Defense has called for new ideas from the tech community, the department's own reform is "still embryonic," though it was given "new urgency" after Sept. 11, he said.

Colton said defense contractors recognize that since the mid-1990s, the percentage of each defense dollar that goes toward IT has grown "exponentially." The "staggering commitment" to the war on terrorism to come in future budgets will focus on detection and prevention and provide "a whole new green-field opportunity for the tech industry," he said. An example is the creation of the national database for identities, he said.

"For information security companies that were part of the Net economy trying to get into this market, now is the time to find a partner," Colton said.