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Cashing in on the Economic Stimulus Package

• Date: 09-03-2009
• By: Jessica Davis

IT solution providers can cash in on the U.S. federal economic stimulus package—if they are ready for it. You need to know where the funds are headed, establish customer relationships and maybe even write proposals for grants.

You've seen your customers' budget cuts and you've watched as technology companies have cut their work forces and earnings projections. Accounts receivable are down at your company. Now, just as it looks as bleak as it can get, can the Obama administration's massive economic stimulus package come to the rescue?

And more importantly: Will you and your business be able to take advantage of the stimulus cash injection?

Executives in distribution who have been closely monitoring the effects of the legislation on the IT channel think there may well be significant benefits for savvy solution providers. And the stimulus package may even be lightening the bleak mood, at least a bit.

"There is some optimism around the stimulus package," says Ken Lamneck, president of the Americas at IT distributor Tech Data. "It's just a matter of understanding it, and figuring out when the money will filter through."

Lamneck says VARs who have worked in government sectors are more likely to understand how the stimulus dollars will flow and how to go about getting them, but this stimulus package is different than previous government spending and has opportunities in all market sectors.

"Typically, it's always been for government projects," says Lamneck. "This is different because government is releasing the moneys to the private sector too, which is something we haven't seen before."

But just because the funds will be available to a broad population of solution providers for their customers doesn't mean all solution providers will know how to go about taking advantage of it.

"One of the first questions we [have] as we look at this is, 'Will this money go to big system integrators as opposed to small mom-and-pop shops?'" says Bob Laclede, vice president and general manager of Ingram Micro’s Government and Education Sales Division.

"And the answer we think ... is that it will flow out much the way that it does now," Laclede says. "People that are in the right position and talk to those end users who are eligible for stimulus funds and are ready to take advantage of those funds are in a position to get this money."

Distribution executives say that technology vendors are working to figure out the potential opportunities created by the stimulus package, and help will be on the way to assist VARs in getting their piece of the stimulus package.

For example, Fujitsu's channel chief Matt McManus says that the stimulus package has $20 billion (£14.5 billion) available in health care for electronic record keeping—some for hospitals and some for individual doctors.

"We are looking at that and will be providing training out to VARs," he says. In addition, there are also funds earmarked for education. "For example, California alone is getting $74 million (£53.6 million) for education technology. ...

"The trick is to write the proposal [on behalf of the end customer] and get the grants" to fund their projects, McManus says. "We've done that with one or two mandates in the past."

"I look at [the stimulus package] as a big lead-generation tool," says Laclede. "You find the end customer, find out the kind of money they are going to get, and then point that solution provider right at them."

Meanwhile, some customers are already anticipating the funds and have put out RFPs (request for proposals), says Mike AtLee, national director of Avnet Technology Solutions, Americas, GovPath. For example, in city business RFPs are up 44 percent in the first two months of 2009 over the same period in 2008. County business RFPs are up 33 percent, and state business is up 10 percent.

In education, for K-12, RFPs are up 58 percent for the first two months of 2009 compared with the same period a year ago. In higher education, RFPs are up 23 percent.

"What that tells you is that all these sectors knew the stimulus package was coming and said let's put out RFPs for what we need now," AtLee says. "These sectors are prepared to say, 'I've got my stuff on the street and am ready to make an award, and I'm probably going to go with some individual contract I already have negotiated.'"

Solution providers who have existing business relationships with these stimulus-ready customers are the ones likely to win this kind of business, says AtLee. Avnet Technology Solutions is among the distributors that are putting together a raft of solution provider training options to help partners take advantage of the funding coming out of Washington.

Solution providers should look for all their distributors and vendors to have their full solution provider-assistance offerings in place in the next three months, once the government puts together the details of how funds will be distributed.

Funds will actually begin flowing in the third (July to September) and fourth (October to December) quarters of this year, or maybe as late as early 2010, says Laclede. That will give solution providers a little bit of time to get ready.

"A lot of [being successful in getting grants for customers] is being armed with information that there is grant money available to that end user," says Pam Markle, a senior markets manager who tracks trends at Ingram Micro.

For example, many health care providers were unaware of their eligibility for funding for broadband access through a Federal Communications Commission program.

"You could see new hospitals coming onto this monthly call that were just learning about these funds that are available," Markle says. "If a reseller walks in and tells the customer that you fit the profile of this grant money, then they can be the trusted adviser."