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Forget Silicon Valley. If you run a small business specializing in network technology, Washington D.C. is the place to be. The federal government is gearing up for a massive overhaul of its computer and telecommunications infrastructure by mid-2008, and tens of billions of dollars in contracts are earmarked for small and minority-owned businesses.
The government is upgrading its equipment in order to increase security and comply with a powerful network standard known as Internet Protocol version 6, or IPv6. Washington has no choice: Without the upgrade, which is now under way in many countries, the world will exhaust its supply of Internet addresses sometime in the next five years. But many side benefits will also flow from the overhaul. The new Internet standard is designed for speed and will result in communications systems that are sturdier, more stable, and harder for hackers to attack.
To pull off this upgrade, the government will need a lot of help from companies that supply info-tech services, including hardware installation, computer programming, and personnel training. That plays to the strengths of startups such as Command Information in Herndon, Va., founded late last year by entrepreneur Tom Patterson, with $15 million in backing from The Carlyle Group. In transitions like this, says Charles O. Rossotti, a former IRS commissioner who now works for the giant private equity firm, "there are always opportunities for people providing services and support."
It was a smart move for Patterson and his backers. Federal purchasers proposed a rule requiring all civilian and Defense Dept. agencies to upgrade their technology infrastructure--PCs, routers, switches and software--to IPv6 within the next 20 months. As part of the transition, the General Services Administration, which buys IT services for dozens of other federal agencies, put out for bid two massive IT contracts to upgrade phone systems and IT infrastructure. The contracts include two of the largest federal set-asides for small, minority, and disadvantaged businesses ever, a total of $35 billion.
Hardware and network services needed for the changeover will be purchased through a new 10-year, $68 billion contract, Networx, that reserves up to $20 billion for small and minority-owned businesses. AT&T, Sprint, and other telecom giants are vying for a $48 billion portion of Networx. Whoever wins will farm a lot of the work out to small subcontractors. And next summer a separate contract, called Alliant, will steer an additional $15 billion to small outfits. By Dawn Kopecki