Defense Department to Wring Savings From Its Info-Tech Buys
By Valerie Insinna
Although the Defense Department continues to pour funding into information technology initiatives, contractors may find the pool of money shrinking over the next five years.
Defense agencies will only spend $58.6 billion in 2017 on IT products and services from industry, down from $68.4 billion in 2012, according to a report by Deltek, a Herndon, Va.-based enterprise software company.
As the Defense Department tries to balance its growing information technology needs with a budget that is decreasing overall, it will concentrate funding on consolidation, cybersecurity and programs that increase interoperability and efficiency, analysts said.
The budget-conscious atmosphere means companies will have to offer solutions that meet the requirements at the lowest possible cost, said Tim Larkins, a defense market intelligence consultant for immixGroup.
“What they’re trying to get here is functional, affordable technology,” Larkins said. “If you are not the lowest price, then you have to justify why the government should be purchasing your product or service.”
Overall, IT contracts will become smaller because long-term contracts tend to go over budget and become hard to manage, said John Slye, an advisory research analyst at Deltek.
“That increases your competition costs for contractors because you have to submit multiple bids or respond to multiple task orders,” he said.
The Pentagon in 2011 laid out a strategy calling for greater consolidation because the complexity of the IT environment “reduces our ability to secure our information systems, hampers our ability to share information, and needlessly consumes the finite resources available to DoD,” it said. The hope is that short-term spending in this area will help spur long-term savings.
According to the chief information officer’s 10-point plan for IT modernization, the department plans to reduce the number of data centers from 770 to fewer than 100, consolidate network operations centers from 65 to 25 and move the services to a joint enterprise architecture.
This provides contractors with an opportunity to help coordinate, consolidate and migrate the networks, said Slye. Network consolidation is “complex, so it takes time to do it. So there are opportunities for that kind of traditional systems integration and software migration support.”
One such program is the Navy’s Consolidated Afloat Networks and Enterprise Services (CANES), which will streamline five shipboard networks into one and equip 190 ships and submarines and two maritime operations centers with hardware and software.
Northrop Grumman received a $637 million contract in 2012 to design and implement the system.
Such standardization will result in a lower operating cost, Rear Adm. Jerry Burroughs, the Navy’s program executive officer for command, control, communications, computers and intelligence, has said.
However, CANES will be a costly undertaking — Burroughs estimated the total cost will be significantly more than $1.5 billion for development, procurement, installation, testing and sustainment of the system.
The Defense Department has already made progress on data center consolidation initiatives. Since 2010, it has closed 380 of its 770 data centers, and it will eliminate another 315 in 2013, Larkins said.
In coming years, the Pentagon will also seek to consolidate its licenses, said Slye. For example, the Defense Department and Microsoft reached an enterprise licensing agreement in January that will provide lower-cost software for the Army, Air Force and Defense Information Systems Agency.
“That’s another area of cost savings and efficiencies that they’re trying to achieve. And they won’t stop at Microsoft, it will be other applications and other software,” he said.
Although the Defense Department will likely spend less money on services from contractors, it may increase spending on cybersecurity. A 2012 Deltek report that focused on federal IT security issues forecast a growth to $4.4 billion in 2017 from $3 billion in 2012.
Cybersecurity threats against federal agencies have increased 700 percent over the past six years, said the report. The most common threats included malicious code, improper usage and unauthorized access.
As cyber-attacks become more frequent, the Defense Department will be looking for better forensic tools that can alert personnel to a threat in real time, Slye said. Such software would help free them up to respond to an attack instead of having to dedicate manpower to do analysis.
“You can put a bazillion people in seats to sit there and watch what’s going on in the network and try to do cyber recognition and figure out if this is a bad guy . … That’s very expensive, very time consuming and mind numbing,” he said.
Training “cyber warriors” with competency in multiple areas will be a challenge for the Defense Department in the coming years, Slye said, noting that the department will be looking for defensive and offensive capabilities.
Some analysts have estimated the cybersecurity growth within in the department will increase roughly 9 percent over the next five years, but Larkins was skeptical of such a boom, although he acknowledged there would be growth.
“Given only modest growth in the market over the past five years and again, an increasingly stringent budget environment, I think a more tepid uptick is likely,” he said. “But still I think DoD requested $3.4 billion in cybersecurity funding in fiscal year 13. That’s a 6 percent increase over last year. So I definitely am seeing this market only growing.”
The Pentagon in 2012 released a cloud computing strategy calling for the establishment of an infrastructure that would cover the entire department. According to the framework, multiple providers will develop applications and software to be run within Defense Department data centers.
Moving to the cloud would allow for greater interoperability and would be cheaper, the strategy said. Capacity could be reduced or increased almost instantly, as opposed to the current environment where such changes can take months.
The Defense Department is moving at a “deliberate pace” toward cloud computing, said Robert J. Carey, principal deputy chief information officer, in a January panel. Part of the challenge of the move will be providing security at the data level rather than network level, which will necessitate continuous monitoring, he added.
Both analysts agreed that vendors will have opportunities to assist the department and services with migrating to a cloud environment and helping to secure that infrastructure in the coming years.
“Certain agencies, specifically the Navy, they’re not using public clouds or community clouds because they feel that using their own infrastructure is more cost effective and more efficient,” Larkins said. “So whereas we’re seeing Army and Air Force move a lot of their infrastructure to a business cloud, the Navy is going in the opposite direction and pulling back.”
The Defense Department is also looking for IT solutions that will increase efficiency.
With unmanned aerial vehicles and other devices providing a constant stream of information, development of analytic tools to help monitor data is likely to expand, Larkins said.
“We’re constantly trying to improve our situational awareness. … Satellites are streaming real-time data from theater,” Larkins said. “At this point we don’t have the resources to appropriately tag that information, to appropriately manage that information, to appropriately analyze and use that information.”
In an attempt to address this “big data” issue, the Department of Defense in 2012 announced its “data to decisions” program to invest $250 million annually across the services for programs that will make systems more autonomous and improve situational awareness. Of that, $60 million is devoted to new research projects. (See story page 34.)
Pentagon officials are looking for solutions that can “extract information from text in any language” and increase the amount of data an analyst can take in, according to a news release.
The Defense Advanced Research Projects Agency also announced the XDATA program, which will dedicate $25 million annually to funding solutions. It wants to develop better algorithms for processing data and create human-computer interaction tools to help process lots of data faster.
The 10-point plan also called for an increased use of agile software development, which produces a product in smaller increments. Proponents of the strategy say it could reduce the risks of large, expensive IT-projects that often end up failing or being outdated by the time they are produced.
Unlike a “waterfall” methodology with requirements, design, development, testing and production fitting into a linear 18-month timeline, in an agile process the customer gets to see the product incrementally, said Mike Mikuta, senior technology director of Dynamics Research Corp. This allows the customer to fine-tune the product as it’s being developed.
“You do these series of rapid integrations every two or three weeks, and then you produce a little bit of a component, and then you show it to them,” he said. “The effect is you get the right product the first time.”
The Office of Management and Budget released guidance in 2012 advocating that federal agencies incorporate a modular approach that divides IT projects into smaller parts “in order to reduce investment risk, deliver capabilities more rapidly, and permit easier adoption of newer and emerging technologies.”
However, Mikuta said it’s a misconception that an agile approach automatically leads to a faster product delivery.
“If you look at the word ‘agile,’ it means the capacity to really change directions quickly, but it doesn’t necessarily mean you’re getting to the end goal faster,” he said. “You may have a lot of requirements, but you might decide to only tackle a smaller portion of them and get to an incremental product earlier instead of trying to do something much larger.”
Dynamics Research leveraged its applied agility model on a project for the Army to design and deploy a private cloud infrastructure supporting analysis of intelligence feeds, Mikuta said.
Instead of delivering a product after 18 months like a typical program, DRC released a preliminary product after six months and then built on top of that capability with updates to the platform every six months.
“We are seeing that we’re producing a product faster, and we’re getting good results,” Mikuta said.
The initial response from the Army is that this kind of approach will help the government incorporate more of an agile approach, he added.