It’s a familiar storyline in the federal government information technology business: Agencies waste billions of dollars on software. Big projects end up being terminated for budget overruns and failure to deliver results.
No agency is as prone to IT procurement debacles as the Defense Department, whose $38 billion information technology budget accounts for nearly half of the entire federal government’s $80 billion IT business.
Information-technology vendors now wonder what the future might hold as budgets begin to shrink. Pentagon officials have promised to reform the acquisition process to avert more failures. But the problem is not likely to be solved with more procurement reforms or legislative measures, industry executives say.
To save money, the government has to change its business model, says Jay Jesse, CEO of Intelligent Software Solutions, a mid-size government contractor based in Colorado Springs.
Recent examples of Pentagon IT horror stories — such as the Defense Integrated Military Human Resources System and several other “enterprise resource planning” projects — prove that the current approaches to modernizing software don’t work, Jesse says in an interview.
The Pentagon’s traditional tack is to publish a “request for proposals” and select a large systems-integration contractor to build the system it wants. That model has proven to be costly and inflexible, Jesse says. The other approach, which has become more fashionable in recent years, is to buy commercial software from the consumer market giants. That option gives the government the latest technology but at a huge price because commercial firms charge an assortment of licensing fees and royalties.
A third middle-of-the-road alternative that rarely is considered by military agencies is to use “government off the shelf,” or GOTS, software, says Jesse.
The GOTS model is about reusing existing software that the government already paid for, and for which it owns the intellectual property. “It costs far less than commercial technology,” Jesse says.
GOTS can be especially attractive to build data analysis and intelligence systems, he says. The secret is to pool several organizations together so they can share the cost of supporting and upgrading the software. “Somebody can bring a small amount of money to the table and get access to non-proprietary capability,” he says.
The Defense Department, like other agencies, has become infatuated with COTS (commercial off the shelf), says Carl Houghton, vice president of strategic planning at Intelligent Software Solutions.
COTS software can be the most cutting edge, but it may not give the government the best deal for the money, he says. The government typically has custom needs and commercial providers have no incentive to adapt their software for a federal agency that makes up a tiny share of its client base.
“The government just can’t incentivize Apple to make changes to its operating system because the user base is not large enough or the financial gain is not large enough for Apple to even think about it,” Houghton says. The Android operating system is open and easier to modify but could be costly depending on the application, he says. “The government can’t get the changes they want for a reasonable price.”
Companies such as ISS are capitalizing on the government’s budget crunch. The firm used to be a small business and this year has seen its revenue jump to $200 million. “We get paid by the hour to make changes to existing government software baselines,” Jesse says. “The customer already might have spent tens of millions of dollars on software. It might cost them less than a million to make changes.”
One example of GOTS software that has generated lots of business for ISS is WebTAS (Web Enabled Temporal Analysis System) that defense and intelligence agencies use for data analysis. If the Coast Guard wanted to build a workflow for tracking vessels or the Air Force wanted an automated tool to track aircraft, using software that already exists such as WebTAS can save lots of money, Houghton says.
When money is no object, the Pentagon will hire a large contractor to develop the software it wants, but that approach is now frowned upon, as it could “take four or five years and a hundred million dollars,” Jesse says. “If you go with commercial proprietary systems, you have to pay licensing fees and you’re locked in.”
The advantage of COTS is that commercial industry pours huge investments into technology. The downside for the government is that it has no say in what innovations are funded. “Commercial companies drive that agenda. They own the rights," he says. With GOTS, the government “drives the direction of innovation and keeps the intellectual property.”
The Pentagon still has the best IT in the world, Jesse says. But he predicts there will be a shift in procurement tactics as budgets decline and agencies realize that there are “some dark sides to both traditional models.” Government IT, he says, “is at an inflection point.” And so is the contractor community. “It’s a tough time to be a big company. But even tougher to be a small company.” GOTS is not glamorous, he says, but offers a market niche that needs to be filled.