JAMES KANE CEO Federal Sources, Inc.

1. JAMES KANE CEO Federal Sources, Inc.

2. Partnering for Solutions A Market Perspective James Kane kanej@fedsources.com April 10, 2002

3. Executive Summary The federal market has changed dramatically in recent years Government IT buying is shifting from “Systems” to “Solutions” Successful solutions providers leverage the knowledge and expertise of their partners Solutions are in season

4. Shattered Misconceptions The proposal process is way too long • You can’t make any money from the government Chasing one RFP can drain your marketing budget for the year Government only buys from vendors in the DC Metro area I sell to a specific vertical market, not to the government I wouldn’t even know where to begin my Federal strategy • The government requires a separate set of accounting books for contractors Only local DC companies know about RFP release dates As a small business, we can’t afford to stretch into new markets Contractors are subject to intense audits Now more than ever before, the Federal government is buying in a commercial-like manner

5. Policy and Legislation - Historical IT Market Drivers 1966 1974 1990 1993 1994 1994 Freedom of Information Act (FOIA) Privacy Act (PA) Chief Financial Officers (CFO) Act Government Performance and Results Act (GPRA) Federal Acquisition Streamlining Act (FASA) Government Management Reform Act 1995 1996 1996 1996 1998 1998 Paperwork Reduction Act Federal Financial Management Improvement Act (FMFIA) Government Paperwork Elimination Act (GPEA) Federal Activities Inventory Reform Act (FAIR) Federal Acquisition Reform Act (FARA) Information Technology Mgmt Reform Act (ITMRA) Legislation created the environment for GWAC contracts, the expansion of GSA Schedules, and the shift from technology selling to solutions buying.

6. New Drivers within the Federal IT Market President’s agenda is driving a solutions approach • More centralized approach to IT management • Corporate approach to the business of government Guided by the President’s Management Agenda, OMB is demanding that: • Enterprise architecture solutions and solid business cases be demonstrated prior to project funding • Any proposed IT solution must match and meet agencies‘ business case Shift in leadership from the CIO Council to OMB • Agency leaders are business people first The combination of the Administration’s policy, and projected IT spending will drive demand for IT-based business solutions.

7. GSA Schedule 70 Sales • Schedule 70 sales currently account for over 60% of sales using federal IDIQ/GWAC vehicles • Professional services projected to account for 2/3 of IT Schedule sales Sources: FSI analysis; GFY 2001 FPDC data; GSA data sales projections as of early 2002

8. Traditional Consulting Traditional Systems Development Develop Strategy Identify Needs Assess Processes Define Requirements Determine Architecture Develop and Implement Manage and Operate • Government had the answer • Many discrete buys • Islands of stove-piped information Traditional Systems Model The traditional approach…

9. Continuous Enhancement Solutions Model • Government states the problem and the desired result • Industry creates the solution • Continuous buying and enhancements • Enterprise and integrated focus This model is facilitated by new procurement methods and contracting vehicles; success requires flexibility and strong partnerships

10. Anticipated Changes in IT Buying FSI analysis shows that customers will shift from stand-alone consulting and systems development contracts to procurements that integrate both sets of skills Source: FSI analysis of GFY2000 and GF2001 empirical procurement data and market trends.

11. How many FTEs will this project take? How much $$ will this project bring us? What will it take to build the right solution for the business of the customer? A New Approach to the Customer • Think of an opportunity or project and answer in your mind the question: “How big is the project?” Successful companies will be the ones who answer in terms of customer functions rather than merely dollars or person years

12. A Contemporary Approach to Business Success in this new market environment requires a shift from a focus that was marked by… • Prime contractor account control • Selling technology and systems • Prime-sub vendors relationships … to a focus that is marked by • Account team that can cover and anticipate customer needs • Selling solutions leverages partners’ domain knowledge and functional expertise • Trusted partner business relationships Strong customer relationships and industry partnerships are key ingredients for successful solutions selling

13. Partnership Model Illustrative Partnership Positioning Matrix High • Strong partnerships are the key to success • Where is your company positioned? • Where are your key partners? • How does your solutions strategy leverage your partnerships? Battelle Total Solutions Booz Allen MITRE Accen- ture KPMG IBM Strength in Consulting EDS Oracle Lockheed Unisys Micro- Soft Source: FSI analysis Low High Strength in Systems Development

14. The Bottom Line In-depth knowledge of customer processes Technology solutions to problems Key discriminators Proven past performance in solutions Credentials Novice solutions provider Disjointed solutions marketing Brand Equity Coherent, consistent solutions marketing Synergistic solutions offerings Solutions Capabilities “One-off” solutions Partnerships---the key to successful solutions selling

15. Thank You James A. Kane, Ph.D. President & CEO 8400 Westpark Drive McLean, Virginia 22102 (703) 610-8700 kanej@fedsources.com