EP111: Forecasting the Future of the SLED Market—with Chris Dixon
The state, local and education or SLED market took a hit in 2020 as COVID shutdowns forced governments to shift into remote or hybrid operations.
But federal funding is helping the market rebound. And money from the American Rescue Plan Act (ARPA) means opportunities for businesses to break into or expand their reach in SLED government contracting.
So, what industries look to benefit most from ARPA? And what can your business do to capitalize on growing opportunities in the SLED market?
Chris Dixon is Senior Manager of SLED Market Analysis at Deltek, the leading global provider of software solutions for project-based work. Chris’ team conducts targeted research aimed at shedding light on the SLED market across multiple industries.
On this episode of the RFP Success Show, Chris joins me to share his SLED market forecast, describing why public sector markets are counter cyclical and how federal COVID relief funding facilitated the strong recovery we’re seeing right now.
Chris explores opportunities provided by ARPA, explaining why cloud and cyber solutions are dominating the SLED market right now and what’s driving growth in the architecture and engineering and operations and maintenance space.
Listen in for Chris’ advice on selling commercial solutions in the public sector and learn how to leverage GovWin’s database of opportunities to win state, local government and education contracts for your business!
Key Takeaways
Deltek’s role as the leading global provider of software solutions for project-based work
How to develop business strategy using GovWin’s database of opportunities
The 12 industries Chris’ team tracks for trends in the SLED market
Why the public sector is usually up when commercial markets are down
How federal aid buoyed the SLED market and prepared it for the strong recovery we’re seeing right now
ARPA’s focus on serving communities disproportionately impacted by COVID
Why there’s lag time before ARPA funding will be available (and how to best use that time)
What mid-market companies need to know about the SLED market
Why cloud and cyber solutions are dominating the SLED market right now
What’s driving the biggest growth industries in the SLED market at present (e.g.: architecture and engineering, operations and maintenance)
The likelihood that governments will maintain e-procurement systems in a post-pandemic world
Chris’ advice on selling solutions built for the commercial market in the public sector
RFP Success Show EP111 Transcription
You're listening to the RFP success show with eight-time author, speaker, and CEO of the RFP Success Company, Lisa Rehurek. Tune in each episode to learn what today's capture and RFP teams are doing to increase their win percentages by up to 20%, 30%, and even 50%, and meet the industry trailblazers that are getting it right. Let's get started.
Lisa Rehurek (00:24):
Welcome everybody to the RFP success show podcast. I am your host, Lisa Rehurek, founder and CEO of the RFP Success Company. I'd love to introduce you today to our guest Chris Dixon. He's the senior manager for SLED market research at Deltek. And today's discussion, we're going to be talking all about the SLED market and forecasting potential changes that are upcoming. So welcome, Chris.
Chris Dixon (00:50):
Hey, my pleasure to be here.
Lisa Rehurek (00:51):
All right. Well, Chris, let's lay the foundation here. Just give us a little bit of background on how you got into state government contract research and built up the SLED market expertise that you have.
Chris Dixon (01:03):
Sure thing. It goes back to 1999 when I joined as a staff person for the National Association of State CIOs, or NASCIO as it's called in short term. Began there managing, actually launching, a federal grant project funded by the Department of Justice's Office of Justice Programs around information architecture. And really that was all about really trying to put together flexible IT systems, flexible databases for interstate information sharing. And actually, that project is still funded and goes on at NASCIO, so I didn't screw it up. And I did gain a little experience at that time in praying to the federal money gods for funding. So that does come in handy when you're in the SLED market as well.
Lisa Rehurek (01:51):
Definitely.
Chris Dixon (01:52):
From that we launched our first... It was right after the year 2000 Y2K event and it seemed like corporate vendor interest in IT really picked up. The internet was gaining steam so NASCIO already had a flood of vendor interest, and it's funding and conferences, as you've seen, went from pretty bare bones to really pretty lavish and large events. So then we launched a small policy or research group within NASCIO. We went from about five staff to a dozen in fairly short order in the early 2000s. And I moved over into a salaried non-federal funded policy research role with them and did that until 2006 when I moved over to a company at that time called Input, which was then acquired by Deltek in 2010, and our services were rebranded as GovWin within the Deltek product set. And so I've been there ever since then.
Lisa Rehurek (02:53):
That's fantastic. I heard you on a webinar, as you know, that you all hosted, that GovWin hosted, and it was just rife with a ton of great information. And that's why I wanted to have you on here. I think this is going to be great for our listeners to hear what you have to say. You all do a lot of research. So tell us a little bit more about GovWin and Deltek. And personally, I don't know the difference. I feel like Deltek keeps buying up the world. There's so many different pieces of the puzzle there. Tell us more about Deltek, GovWin and what it is that you all do.
Chris Dixon (03:26):
Sure. Deltek really focuses on being the leading global provider in software solutions that help companies with a lot of project based work. So you'll see architecture, engineering, construction, advertising, a variety of global industries that they are involved in. And we started out as a partner with Deltek, providing our data of opportunities through one of their solutions, and then they ended up buying us after that and incorporating us into their product set. So the public sector market, as you know, it's all project-based work for contractors. There's a set start date, set finish date, and all the variety of accounting solutions, HR-related solutions, everything that goes into that are the sort of solutions that Deltek provides. And GovWin was a good fit in the sense that we have the leading database of opportunities out there on both the federal and the state local and education or sled side as we call it.
Chris Dixon (04:31):
So you can go into our database and easily set up searches and refine your business strategy around the half-million, give or take, opportunities that come to market every year in the SLED sector. Plus, we have a variety of other value added data tools for account planning. You can go in and use our government profiles tools, agency profiles tools to get your bearings on all the different places to do business in the market, and then use that for your strategic decision making. And then, with my group and the reports that we publish, we cover the whole of the SLED market. 12 different industries that we track: construction, public safety, operations and maintenance, technology and telecom, which I know is the focus of the discussion here. So we research across all 12 industries looking for the macro trends, the industry specific trends across the market.
Chris Dixon (05:23):
The nice thing about the database of opportunities that we... is really the foundation of all of our research, is that we're grounded in what's going on where contractors have to go and bid and win something. There's a lot of white papers out there, a lot of strategic guidance. And those things are nice, but at the end of the day, if they don't translate into something you can go and win, it doesn't mean much. So we really build our research from the street level up rather than the top-down. But the top-down is nice, and there's always the strategic planners in companies that really need to know the big picture for justifications within their company, for funding resources, things like that. So they need to know the big picture as well so they can have the resources for the frontline sales people to go after the opportunities.
Lisa Rehurek (06:08):
Yeah, it's fascinating. I love what you all do. And for our listeners, you definitely need to... We'll have the links in the show notes. You'll definitely need to go check out... If you're not subscribed to Deltek or GovWin, you need to go out and at least start taking a look at what is offered there because I know you all put out a lot of really great papers and a lot of really great webinars. And then of course your services are really wonderful. So thanks for that background there and a little bit more info and everybody get out there and take a look at what they offer because it's some good stuff.
Lisa Rehurek (06:41):
So let's just kind of dig into... I want to talk a little bit about COVID. I would say most of us didn't know how COVID would shake up anything, let alone the SLED market. And we didn't really know what that was going to mean for companies that were really reliant on it as a revenue source, but it turns out that we took a big hit in 2020 for sure, but it feels like it's rebounding pretty quickly. Would you agree with that?
Chris Dixon (07:10):
Definitely, yeah. And I know we'll have a chance to talk even further in depth as we go, but I think the big picture here is that on one hand the public sector in general is somewhat countercyclical. When the commercial market is down, we're a little bit up. Or, if we're not up, we're a bit more sustainable. As you know, governments they collect... this spring, they collect taxes and revenues based on the tax rates and the money earned from the previous year. So when a recession hits this year, they still have the revenue that they collected from activities last year. So they're not like a commercial sector entity where if the cash register stops ringing, all of a sudden they're they're in recession. So they usually have a 12 to 18-month lag before we start to feel the symptoms of a recession.
Chris Dixon (07:56):
And in the case of COVID, it was an engineered or an inorganic recession with the government essentially shutting down business activities, plus the disruptions as governments move from pretty much 90% on-premises based operations to fully remote in most cases. So that was, in some cases, probably the biggest disruption that occurred in 2020 was really the operational changes more so than the revenue impacts. Plus the Trump administration at the time pushed down a variety of aid through the CARES packages. I guess there was three of them. There's been so much that's happened in the last year or so it seems like ancient history, but that funding really was pretty lavish. If you look at it compared to the aid that came down during the recession during the Obama administration of 2008, '09, '10, governments received... I mean, it was three times the amount of money that came down, and it wasn't just tax-based adjustments, which was half of the Obama related aid. It was tangible aid that governments could put directly into their coffers to backstop and cover the costs of their COVID response.
Chris Dixon (09:01):
So the reality is, for the most part, governments should not have been paying out of pocket for a lot of their COVID response, thanks to that federal aid, because it was so enormous. And also in many places in the United States, the COVID impact through 2020 was really fairly light. If you're a rural county in Nebraska or Colorado or some places in some of the cities and places in middle America, you had months to get ready for your responses, it sort of worked its way in from the coasts and the larger metropolitan areas, to get your affairs in order, in terms of your response. And then in many cases, the impacts that hit some communities were much lighter than, say, New York city or someplace like that. So that they really did provide a foundation that kept the sled governments from having to go make major cuts in their spending.
Chris Dixon (09:54):
Now, granted they did do some across the board cutting and things like that. But again, it wasn't nearly what it might have been considering their response to the 2008, '09, '10 recession. It was much more moderated. And then the Biden aid that came down through the American rescue plan act, or ARPA, with the two tranches of money in March of '21 last year and then March of this year, they had that money available to spend in a variety of categories through 2026. And if you look at that funding, it's almost an extra year of grant funding. In most years, the standard federal aid that comes down to the SLED sector is in the $300 billion ballpark, give or take 50 billion depending on priorities and the given administration's enthusiasm for it. So that 290 billion that came down into the SLED sector just for states and localities represents a whole extra year federal aid that they can spend over a four or five year period. So that's not insignificant. And then the aid that came down between 2020 to 2022 for education was over 400 billion, so that's even more than states and localities got. So when you see numbers that big, it definitely backstops the market and provides a floor for them that is pretty extraordinary from what we've seen in previous recessions. So that really has buoyed the market and prepared it for a strong recovery that we're seeing right now.
Lisa Rehurek (11:14):
I love that. It's interesting, because from our perspective it felt like with COVID it was more of the whole staffing issue, having them getting used to working remotely, as you mentioned earlier. And kind of once they got their footing, which took a while, particularly in the state space, once they got their footing and figured out how they were going to do this a little bit more remote and how employees were going to be working remotely or hybrid, then it really started kind of ramping back up again, so that is very much in line with a lot of what you're talking about. And then of course now all of these funds that they've got, do you anticipate seeing a pretty big increase because of these funds in opportunities that we see? I was looking at one of the graphs from your webinar and showing the dollar amount of opportunities. Do you see that already increasing because of the ARPA money? Or are you anticipating that it's going to grow even more because of that?
Chris Dixon (12:13):
Yeah. I'd say as of right now the ARPA spending... And it's tough to tell because of the frequency of the reporting. States and localities did start providing some annual reports toward late last year. So it doesn't give us a very complete picture of where they might be right now, and they were supposed to be filing their project reports. They file an annual spending report that covers the big picture of the seven major categories. And then the projects they have within those major categories were supposed to be reported this January. From what we saw from last year's data, there were only a very few states, Connecticut, Maryland, had very evolved in elaborate plans where they were listing a large number of projects. Many states at that point in time were saying, "We don't expect to address this funding until our spring 2022 legislative sessions, things like that. So they were still appointing small commissions or oversight groups to really begin thinking about how to dole that money out.
Chris Dixon (13:11):
And I know with many localities they were setting aside portions of funding for community based input on where to spend the money, things such as that, which rolled it out a little slower. I think the reality was that the CARES act funding that came down in 2021 really gave them the breathing room that when this rescue plan funding came down, they could stop, be deliberative about it, and then move forward with some tangible spending goals or tangible outcomes. The Biden administration, within that reporting, is looking for governments to provide outcomes based returns. So they're giving them time to put together and structure a program.
Chris Dixon (13:56):
And much of the funding is, there's a focus there around... Equity is a big term within that funding, so the Biden administration is looking for this money to be targeted toward disproportionately impacted communities as a result of the COVID events of the last couple years. And they want to make sure that when you set up a program, are you providing.. how are you focusing on disproportionately impacted communities? How are you providing ensuring that they have equitable access to whatever project or program you're funding or boosting with this money? How are you providing equitable access to contractors or providers that might be performing these services? And then how are you ensuring that when you report, the outcomes are achieving the equitable results that you state at the outset. So that forces governments to take a breath and really get their ducks in a row as they push this funding out. And we've compiled, and we'll be publishing later this month, a data set of all of those ARPA spending plans.
Chris Dixon (15:00):
As you mentioned, we have a ton of reports and things that we do publish, and those at our GovWin.com website, you can find them on our social media. Our marketing group does a great job promoting them, a variety of ways you can access them and download them for free. Then on the client side, one of the value-adds we provide is around some of these programs. We we will compile the data sets so that you can... whether it's our IT market forecast or ARPA spending, you can get in there. You can dial it down to the specific areas of interest that you have. You can look at which states or localities you want to drill down to. So we have just compiled the baseline ARPA data set and we'll be adding to it as we find project plans and other things like that.
Chris Dixon (15:45):
And sometimes it's funny, we get during a recession or when federal aid comes down... And I've seen it happen before, a senior VP in public sector, maybe they're in federal side or global, sees these big numbers in USA Today, or the Washington Post or the Wall Street Journal, and the directive goes down to their SLED group, "Go get this money." But the reality is, you want there to be a little lag there. You don't want it to be a rush to the funding because you want to have time to put your game plan together. So sometimes it seems like contractors are a little disappointed when they find out that the money's not going to be flowing super quickly because everybody's got their quarterly numbers they want to hit in their annual numbers, but really when it comes to targeted funding like this from the Fed, it's nice to be able to get your bearings and see where states and localities are skating on this so that you can put together your capture plan and get out there and get it an organized way.
Chris Dixon (16:40):
If it's all going to hit the market within six months, then every contractor is going to be in there scrambling for it and it just ends up being... you get squeezed out because it's a rush to the money rather than contractors are picking it up, just because they get there first rather than because they've got the best solution or the best option for the government to pursue or implement.
Lisa Rehurek (16:59):
Yeah. We are really big promoters of, "Don't just bid on stuff to bid on stuff", right? Obviously we want to help our clients develop a game plan for... like you said, the capture plan for... and start building those relationships. And there's a lot of companies right now that are saying, "Hey, we want to get into the SLED space because we know there's going to be a lot more money coming down and this is a good time for us to break into it." But you can't just come in, find an RFP, and bid on it. Right? I mean, all of that capture planning and relationship building is very important. So I like that you mentioned that it's going to be a little bit of a slower flow and it does give them the time to do that piece if they're really serious about getting into the market, so thanks for that.
Lisa Rehurek (17:45):
Now I know you spend a ton of hours with research and, as we keep mentioning, that you all have a lot of really great data. What are a few loud and clear takeaways regarding the SLED market, particularly as it relates to mid-market companies? Is there anything that you can kind of tout as loud and clear takeaways from those companies?
Chris Dixon (18:06):
Well, the reality is the mid-market companies make up the bulk of really where you want to say the rubber meets the road with this market. I work with a lot of the fortune 100 companies that have SLED groups and the reality is the companies are participating in the channel, the value added resellers, the local business that's doing say $30, $40, $50 million worth of SLED business in the Kansas city... [inaudible 00:18:36] billion there. I meant to say million, hopefully. In the greater Kansas City area, those are the companies that are probably doing 50%, 60%, 70% of the implementation work. Even the largest companies out there, they only have the resources to pursue a subset of the market. They're the ones, they want to go get the New York City contract. They want to get the LA or Harris County contracts, the State of Illinois, things like that. And it's really the mid-market resellers are the ones that cover everything from that level down to maybe the stuff that's too small to pursue, but really the rest of the Metro areas for all practical purposes.
Chris Dixon (19:14):
So they're really the heart of this market, and it's interesting when you meet them. And I've been to a few conferences and spoken at a few that are populated by those size companies, and they're out there looking... They've got the conference floor where they're trying to figure what Microsoft or Google or solutions they're going to be pursuing and implementing, what new products are out there from Oracle and companies like that. And it's interesting when you talk to them, most of them did not start out with a SLED business plan of any sort. All of a sudden a sales person just comes in and says, "Hey, we won a deal to network the county school system." Next thing they know a third of their revenue is coming in from the sled market. Maybe even their largest single renewable contract that they've got is in the sled market, and they find themselves just by serendipity in this market and looking to grow within their Metro areas and build relationships.
Chris Dixon (20:08):
So the key takeaways for them has been, I would say, in recent events, is that both the Trump and Biden administrations have done a good job of pushing funding that was really nationwide. It was large enough amounts of funding that it could push down to all corners of the market. To some extent, I used the term that throughout this COVID response the federal government has really used a sort of brute force funding approach to help the SLED market, which I think has been good. You don't want the federal government to spend too much time on the drawing boards thinking about overly refined programs for distribution. As we've seen with the rescue plan funding, half of it went into the transportation space and most of that money is going to flow out through the traditional transportation funding channels, and that money is already moving. The other half that's in some newer or more innovative areas, whether it be closing the broadband gap, whether it's conservation infrastructure, whether it is serving the disproportionately impacted communities through mental health programs, what have you, supplemental educational funding to close learning gaps, they're giving governments time to, let's put together the strategies, let's do the inventories, and then bring those back, and then we will award the funding in a targeted way based on either the need of a given community or where we've identified. Some things are just geographically specific.
Chris Dixon (21:35):
So that other 550 billion will be money that we'll see moving later this year and then all the way through 2026 timeframe, probably starting to taper off after that. And it's supposed to all close the books on it by I guess, 2029 or '30.
Lisa Rehurek (21:51):
Okay, great. Great information. So we are getting some amazing information from Chris. We're going to take a quick commercial break and we will be right back with more questions about SLED market research
Speaker 1 (22:04):
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Lisa Rehurek (22:28):
All right, everybody. Welcome back to the podcast. I'm Lisa Rehurek, your podcast host, and I'm here with Chris Dixon. He's senior manager for SLED market research for GovWin and within Deltek. So we started to touch on this a little bit right before the break, but we work with a lot of tech companies, tech CEOs. So what do those specific listers need to understand about the SLED market right now? I know you mentioned there's funds in there for broadband. What else do they need to know about the SLED market and where it's going?
Chris Dixon (23:03):
Sure. I'll hit a couple highlights from some upcoming research. As you might know, we do a quarterly bids report. One of my colleagues, Paul Erby, he's really the master of diving into the opportunities database. And within that database, we classify all of the opportunities that come to market across roughly 4,000 different, what we call, smart tags. And those smart tags really help contractors using our solutions or reading our reports. You can really drill down into what specific industry do you care about? Are you all the way down to looking for implementing ERP solutions in hospitals or sensor systems for infrastructure monitoring, things such as that? You can really drill down and it saves you the guesswork of, oh man, am I finding everything out there that I need? Am I using the right keywords, things such as that? So the nice thing about the opportunities and the smart tags is everything we publish really relates back to those.
Chris Dixon (24:02):
So if we're talking about what's going on in the cloud space, the cyber space, then you can take our report and go straight into our database and really begin to find those opportunities in short order. So his Q1 '22 bid report will be coming out, I guess, later this month, and that'll be looking at the year over year data versus last year. And one of the nice things we're seeing is we're measuring the recovery in bid activity or bid volume within our database versus our previous peak of market activity, which was of course late 2019 prior to the pandemic lockdowns. So we're expecting in Q1 to be back to 98% of the bid volume from 2019.
Lisa Rehurek (24:42):
Wow.
Chris Dixon (24:42):
And that's great. We were really probably not... Late last year we weren't expecting to hit that kind of number until maybe late this year, maybe into early 2023, so we're actually ahead of our earliest projections there, which is nice to see. We always rather be... have our guesses and forecasts to be proved wrong on the upside rather than the downside. And the tech and telecom space is up 12.6% year over year versus its activity last year. And to put it in perspective, that ranks only sixth out of the 12 industries that we've got, so it shows you we've got some industries up there well into the double digits. Now 12.6% growth year over year would be a phenomenal growth rate in an average year so that just shows you the speed and the energy with which the tech and telecom market is emerging out of the pandemic induced recession. So it's definitely doors are open for business out there in the SLED market, and hopefully contractors out there feel like they're seeing a market that feels about like what it should be or what they were hoping it would be coming into this.
Chris Dixon (25:46):
And I think in terms of what else we're seeing, it's no surprise that cloud and cyber are kings in this market right now given global events. on the cloud side, we're seeing that governments are really interested in managing some of the pain points around operations and management of cloud. To a certain extent they had to move a lot of their software and platforms to the cloud, just because in a lot of cases the major vendors out there are just... they're moving you off on-premises implementation to cloud-based anyway, so you didn't have a choice. But that's not all it's cracked up to be. There's still a lot of maintenance and upkeep. And I think one of the things we're looking for in this market is to see governments really get out of the reactive mindset, which was really reinforced by the pandemic and the economic factors that dragged the market down some over the last couple years, and really began moving out of that operational savings mindset.
Chris Dixon (26:42):
It's nice. The savings from cloud was really more around the flexibility of those options, the security of those options, the reduced time spent managing your on-premises activities. But now it's time for governance to begin to think about how do we use the flexibility of these solutions to begin creating flexible government operations? Whether it's implementing e-procurement systems, we saw a lot of governments were trapped in old paper based or even PDF email based processes prior to the pandemic and are maybe now looking to fully automate their procurement with their ERP systems and other cloud based solutions that are out there. So it's really about transforming your operations, creating more flexible operations, serving citizen needs better, operational needs better, and really not obsessing about the fact that well, we're spending more now on cloud storage than we did on on-premises storage. That's just the fact that having all the cloud-based software flexibility is allowing you to capture a lot more data and create more data sets and implement those things. So, that's a good thing. It wasn't about potentially eliminating your storage costs.
Chris Dixon (27:49):
So I think we'll be watching that transformation over the next year or so with state and local governments. And then we're really hoping to see... On the cyber side, governments have declared it their leading pain point for many years now, so it's almost banal to point out that cyber is a high priority with them. I think what's promises to be transformative here is that the federal government is pushing down this billion dollars in planning grants, through the Rescue Plan Act, that states are supposed to be allocating 80% of it to localities. And then I think 250 million of the 800 million that goes to localities is supposed to go to rural counties. I think 15% of counties or 20% are classified as rural.
Chris Dixon (28:35):
So they're really pushing this to the farthest reaches of the market, and that's why I say this is great for the mid-sized businesses out there, because you don't have to just do business in just the largest school system or locality within, basically, the reach of your service area. You can really begin thinking about everyone that's within that service area as a potential business opportunity. And I think the great thing about those planning grants is even if you're not in, say, the cyber security... If you're already providing cyber security solutions to Johnson county, Kansas, I'm hung up on Kansas City today for some reason, they're going to get that money. And ideally, if you're already a strategic consultant with them, you can help them begin putting together the inventory that they're going to have to send back up to the department of Homeland security. The nice thing there is the federal government's going to have its first ever baseline of, where is the cyber security? What's the cybersecurity state of the state in the SLED market?
Chris Dixon (29:34):
And from that, ideally they'll begin to begin pushing some national strategies, maybe begin looking at, hopefully, some targeted funding or at least incentives to be in closing gaps that might be out there, pushing better cooperation and coordination between state capitals and their localities and school systems. So I think that one, even if you're not in play to get one of these planning grants, and it's a relatively small amount of money at the end of the day once you push it to every corner of the United States, it's that inventory the DHS will have that will begin to now build a strategic consensus across the nation and how we respond to cybersecurity. What's the baseline that should be in operation in every government in the United States? And then for all vendors in that space, ideally it should create a sort of rising tide that raises all boats over the next few years.
Lisa Rehurek (30:23):
Yeah. I love hearing all of this. I think it's a really exciting time for tech and telecom in the SLED space for sure. I want to go back to something that you said though, because you said, "Great at 12.6% growth." I love that, but they're, I think you said, sixth. What are some of the bigger growth industries for the SLED market?
Chris Dixon (30:44):
Well, we're seeing.... Pardon me here while I pop up something on my screen. I know that architecture and engineering was leading the market.
Lisa Rehurek (30:54):
Okay.
Chris Dixon (30:56):
Part of that is, I think, anticipation of the infrastructure funding that's coming down and that will be pushing... I think states are taking a lot of items that maybe were not in their active schedule for implementation or beginning to move them into their final stages of planning and development so they can begin to get ready to utilize some of this federal money coming down, so no surprise there. And then in some areas we see they're bouncing back. Operations and maintenance is bouncing back strong, simply because it was so dramatically cut during the two years of pandemic response. With everyone moving to remote, there was less need for a whole lot of operations and maintenance spending with no students on the campuses.
Chris Dixon (31:41):
We saw governments, particularly local governments, cut their staffing down to year 2000 levels during the pandemic, but that's because local governments employ a whole lot of operations and maintenance. They run the largest number of facilities and grounds, and they're the ones that have the students and the citizens coming into office buildings, more so than state governments do by far. So a lot of those are bouncing back simply because they were were cut so dramatically that they had nowhere to go but up. And IT, what we really saw was a shift from the... We really saw a lot of our contractors talked about we're doing, "We're doing a ton of work and they're just tacking things on to existing contracts. We were already providing their services, their licenses for some given productivity software", right? And then only a certain portion of their worker population was using those, but then when everybody went remote, now we had to blow that out to pretty much a license for every government worker to use it from home, or the vast majority of them anyway.
Chris Dixon (32:39):
So, a lot of it was really just blowing out more constrained implementations or offerings. And then we also saw a huge amount of activity move to the cooperative purchasing space, especially with the emergency orders that were in place in pretty much every state and local government at some point in time. They were freed from their previous procurement rules so that allowed them to basically just go out to their existing vendors, expand existing contracts with literally no questions asked, go straight to a cooperative purchasing vehicle and grab things as quickly as possible because they didn't have to worry about if we are going out to... Let's say, normally they'd have to do a competitive bid at $25,000 or more. They can now just run to the cooperative and spend $75,000 no questions asked.
Chris Dixon (33:23):
So we saw some of that as well. And then so what we're seeing here with some of the bid recovery is we're seeing some of the activity and things that were done under emergency orders that weren't creating bids are now coming back and creating bids for future procurement, things like that. So, that's part of the things that has buoyed the rebound in all the different industries. Really, we only had one that's in negative and that's in financial services, in professional services really more around strategic consulting and operations, things like that, and that one's only a half-a-percent lower versus last year so even it's rebounded pretty strongly. And professional services always falls the furthest in a recession because the fact that when governments are furloughing or laying off workers, they don't have time or the slack in the system to begin to think about things very strategically or reorient things. They pretty much have to go with what they've got until they can catch their breath and start making some forward looking plans, which we see them doing now.
Lisa Rehurek (34:18):
Yeah, just trying to keep the holes in the bucket filled versus anything proactive. Totally [inaudible 00:34:23].
Chris Dixon (34:23):
Exactly.
Lisa Rehurek (34:24):
Yeah. Well, I, for one, and I know my team and probably everybody in the world that we live in, is like, "Go e-procurement", because, holy moly, we did see influx of at least allowing email-able proposals, but we're starting to see that slip back to where they're asking for hard copies again. And I'm like, "No, don't go backwards."
Chris Dixon (34:47):
Yeah, it's unfortunate. When we used to work for NASCIO and I sat in, we'd do research with the Public Technology Institute, PTI, which works with city and county IT leaders. You'd hear them bemoaning procurement processes all the time internally because they can't get solutions and contractors in as timely fashion as they would like because they have to go through an eight month process on procurement. The reality is procurement is a process built to shield government from risk, not to move quickly. But, certainly, I think... Hopefully, the pandemic has created the final push toward e-procurement or near universal e-procurement across the nation over the long run, even if in the short term some of them are falling back to their older processes. And it could just be that once the emergency orders were reduced or canceled, they just haven't had time to sit down internally and strategically say, "What kind of a E procurement do we want? Do we need to wait for maybe a more comprehensive ERP financials implementation within our government?"
Chris Dixon (35:53):
We don't want to necessarily lead that process. We want to wait for that transformation to happen and then plug in the E procurement that meets that larger need, rather than have e-procurement get out there with a solution that then later, when larger government comes back around to maybe cloud-based ERP or financials, they find out, oh, our e-procurement system is not going to play nice with this one. Now we're out to look for another $5 million solution or something. So it could be some of that.
Lisa Rehurek (36:19):
Yeah, well, I'm hoping. Here's hoping. Let me ask you this. What company niches would you encourage to have a little bit more caution? Are there any niches out there where you're like, "Oh, we caution you with the SLED market right now?"
Chris Dixon (36:34):
No, we don't. There's nothing that jumps out as particularly risky. I think most companies out there understand where the major transformations are going, and most companies are moving their solution sets toward where governments want to go. We're going to be in a long transition from on-premises to cloud-based solutions in a whole variety of areas. The nice thing about cloud is, as the transformation occurs, whether you move to platform as a service or desktop as a service, or what have you, there's all these different of services now, at least it's more useful to speak in those terms than it is just to say, quote/unquote cloud anymore, which is really too vague to be meaningful at this point.
Chris Dixon (37:24):
We see that it opens up new opportunities for transformation. We see this with Deltek or with GovWin. No sooner do you move to the cloud with your solution and offer up a whole new batch of features within your solution than the clients are saying, "Well, why can't I make a dashboard like this?" It's like, "Well, you couldn't make a dashboard at all six months ago", but now all of a sudden they're bored of what you've given them and want something new. And so that's a good problem to have, and I think governments will be running into those same problems. So, really, I think for contractor side out there doing business is, can you... as you're doing business, make sure that you can scale fast enough to meet client needs, then don't... Look at your solution sets and your offerings and make sure, do you feel like what you're offering them is going to be flexible enough for them to grow with it over the long term?
Chris Dixon (38:16):
And no one can really see the future well enough to guess all of those things, but I think you have to really look at yourself and think. And on the SLED side, what we see, you have to be very realistic in your mindset, because very few companies out there are solely in the SLED market, that's their only market. Almost all of them grew out of maybe a larger federal oriented corporation, or they grew out of a commercial side of a corporation. And what I see a lot with the sled side is you'll get cram-down of solutions from your commercial side. Especially if you have a recession, commercial takes a 10% hit and now they want you to go make that up in the public sector. So find a way to sell solution X in the public sector.
Chris Dixon (38:56):
And I think on the SLED side, if you're the one that's responsible for moving that solution or migrating it in a big way to the SLED side, make sure is your company giving you the flexibility to work with to do whatever necessary tweaks you might need to make that serve the public sector better? Are you getting the business use cases and the marketing verbiage and the things you need to push that in the sled sector and to make it a successful implementation so you don't feel like you're having to go out there and sell somebody something that in a year or year-and-a-half they're not going to be happy with, they're not going to the level of use that they want, and you're going have trouble maybe renewing a contract down the road. So I think that's probably a pervasive problem in the SLED market that's always there and won't go away because very few sled groups get to dictate their products that they're trying to sell, public sector facing versions of solutions built for the commercial market, and so there's always that tension there.
Lisa Rehurek (39:51):
Yeah. I actually really like what you said there because we see it, too. We help companies kind of break into the state government and they think it's going to be easy. Let me just respond to an RFP with the service that we already offer and we'll get a three to five year contract and it's going to be a nice lucrative contract. They're a little starry-eyed and they think it's going to be that easy, but there's a whole lot that has to be set up there for that to work to your point [inaudible 00:40:13].
Chris Dixon (40:12):
Yeah, it's a unique discipline. But I think the important thing to show for any of the SLED strategists I've ever worked with, it's always a situation of you can't let the perfect be the enemy of the good. I've talked to sales strategists for Fortune 100 companies who have SLED groups doing a billion dollars in business and their strategy is we go into the GovWin database and find stuff to bid on, right? They struggle. Everyone is under resourced and nobody wants to leave anything on the table. It's hard to say, "You know, we just can't go bid on that right now. We just don't have the resources." But if Miami-Dade comes to market and they want to spend $20 million on something, it's impossible for you to not go after that if that's in the wheelhouse of what you're trying to do, just because your bucket is full in other areas.
Chris Dixon (41:03):
But you can at least block and tackle well. I think companies that succeed over the long run are the ones that do block and tackle well. Are you at least doing some degree of after-action evaluation on what you win and lose? Are your marketing materials SLED-specific? You hear companies, "We went out to bid on... We're trying to win a sensor system for a waste station on the highways and my all the information I get to push out on our sensors group shows unmanned burial vehicles from the Afghanistan war." It's not SLED-specific stuff. It's not speaking to the SLED need, and it's really about getting ahead of what the SLED buyer wants. I've heard it a thousand times from it leaders. The last thing they want to hear is a salesperson sit down in front of them after they've hit you with a dozen emails and phone calls to finally get that sit down and say, "So what can I do for you?"
Chris Dixon (42:00):
You have to know what you can do for them when you sit down if you want to really impress them, and that's something that you can do regardless of whether the market's up or down or what niche you're in. That's a practice or a discipline that you can have regardless of any external circumstances.
Lisa Rehurek (42:17):
Agreed, wholeheartedly. So this has been fantastic, Chris. How could our listeners get in touch with you or get in touch with GovWin if they want to learn more?
Chris Dixon (42:28):
Well, you can always reach me at chrisdixon, D-I-X-O-N, all one word, @delltech.com. And you can feel free to put that into the notes to the podcast. They can always reach out to me directly. If I'm not the person that can help you the best, I will see that you get to the person that can help you the best. If you have a need with Deltek, we try not to stand on a lot of formality and it's sort of next person up in terms of helping the clients, so I'm always happy to do that. And of course, you can go to govwin.com and you can sign up for email announcements of when we release reports or do podcasts. You can follow us on social media. You won't miss anything there.
Chris Dixon (43:07):
And, and like I said before, almost all of our reports are freely available. You just have to of course give up your contact details as always. But it's great stuff, and I would say, "Hey, if you give up your contact details for one piece of market information in the next week, make it one of the GovWin reports that we have available right now. And there's a dozen of them up there that you can pull down, whether it's our recent hotspots report where we feature the top 10 hotspots in the SLED market for the year, and there's always a mix of it and other industries there.
Chris Dixon (43:38):
And even for those hot spots that aren't IT specific. I always recommend... The nice thing about the IT market is, anything government does and any area of its operations is an indicator of some sort of IT solution that it might need. So whatever hotspot they have out there, think about what the coattails are for an IT follow-on solution that might help them with that pain point, whether they're setting up green ways and cycling paths for quality of life within their community, they need cameras and sensors there for public safety, right? So there's always a coattails option there for IT, so all of our reports, I think, have great pertinence on the IT side and on the IT services side, and we've got a bunch of channels that you won't miss a thing when it hits. LinkedIn, you can connect with me on LinkedIn as well and we do a lot of posting there also
Lisa Rehurek (44:30):
Wonderful, well, I can attest to the reports being very valuable, and you all put out a lot of great information. So listeners get out there and sign up and connect with Chris, and you'll get a lot of really great information. So, Chris, again, thank you so much for being here. I really appreciate your insights and your time.
Chris Dixon (44:48):
My pleasure. Happy to do it.
Lisa Rehurek (44:49):
Wonderful. Well, thanks everybody for being here. On behalf of Chris and myself, I want to thank you for listening to the RFP Success Show.
Speaker 1 (44:57):
This has been another episode of the RFP Success Show with Lisa Rehurek, 8-time author, speaker, and CEO of the RFP success company. Thank you for joining us. If you have feedback on today's episode, email us at podcast@rfpsuccess.com. No matter your business size or industry, if you have an in-house RFP team or need outside support, the RFP success company helps increase RFP win ratios by 10%, 20% and even 50%. Learn more at therfpsuccesscompany.com.