Zone H

Computer security contracts stuck in pipeline

April 21, 2002
By Elinor Mills Abreu

SAN FRANCISCO, April 19 (Reuters) - Security consultants and technicians see a windfall from the Bush Administration's interest in securing the country's physical and digital borders, but it may take years to see the results.

For companies used to competing in the go-go world of commercial business dealings, selling to the government requires an entirely different timeframe. The victor is usually the turtle rather than the hare, the contractor with the most staying power.

"There's a built-in history" with U.S. agencies, said Ron Knode, a director security services at Computer Sciences Corp. (CSC), one of the bigger contractors, which got its start working for the U.S. space agency NASA 40 years ago.

"It governs how fast money can hit the public contractor base," Knode said. "Budgets are budgets. They are often set five years in advance."

The Sept. 11 terror attacks have sparked a move to boost the physical and digital security of the federal government, which has technology companies scrambling for work to offset sluggish corporate spending on information technology.

Spending specifically on securing federal networks against attack is slated to increase by 64 percent to about 8 percent of the total budget, according to Richard Clarke, special cyberspace security advisor at the National Security Council.

The budget for fiscal 2003 calls for a 15.5 percent increase in overall spending on information technology and a near doubling of spending on homeland security to $37.7 billion, according to the Information Technology Association of America (ITAA) and the Government Electronics and Information Technology Association. "Government IT security spending has been dramatically under-funded for years," said Harris Miller, president of the Herndon, Virginia-based ITAA, whose members include a range of technology companies.

"Sept. 11 may have added a bit more edge to the demand, but it was a process that has been building up over the years," Miller said.

CSC, CERTICOM, IBM CONTRACTS

CSC and mobile security code provider Certicom Corp. are among the latest to announce new government contracts. CSC was one of several companies selected for a $680 million contract to provide systems engineering and technical services to the U.S. Army Space and Missile Defense Command.

Certicom announced a license agreement to provide technology to the U.S. Federal Aviation Administration for securing the communications between air traffic controllers and pilots. The amount was not disclosed.

In April, International Business Machines Corp. said it was one of a handful of companies to receive a contract to modernize the U.S. Department of Defense's financial operations and integrate the logistics, healthcare, accounting, finance and personnel systems with others, said Gary Ambrose, IBM's contact for the Defense Department and a retired Air Force general.

"We're seeing a lot more proposals that have an IT (information technology) spin on them as opposed to weapons system development," said Steven Myers, chairman and chief executive of SM&A, a Newport Beach, California-based provider of competitive proposal management services to companies like Boeing Co. and Raytheon Co.

"Computer security is at the heart of modern day command-and-control," Myers said. "They (agencies) will spend to ensure that they have security networks that can't be hacked into."

Despite the optimism, people familiar with the complex workings of federal contracts say the process moves slowly, making it hard for companies like CSC, Electronic Data Systems Corp. and PricewaterhouseCoopers to say how much money they expect to take in in any one period.

"It will be summer and fall before a lot of the work actually hits," said Paul Connelly, a partner in the technology security group at PricwaterhouseCoopers, which gets half of its business from the U.S. government.

"It's too early to tell," agreed Daryl Eckard, director of security and privacy delivery at EDS in Herndon, Virginia. "We're not seeing where they're putting the money out there yet. It's coming across in small chunks right now."

EDS, which had more than 20 percent of its revenues in 2001 from governments around the world, was a lead recipient for a landmark $6.9 billion contract awarded in 2000 to build an intranet, or internal network, for the U.S. Navy and Marine Corp.

Universities are likely to be among the biggest beneficiaries of the federal largesse on computer security, said John Pescatore, an analyst at market research firm Gartner Inc.

BIOMETRICS, PKI

In addition, companies that offer products or services in areas that have been slow to take off in the commercial market are eyeing federal funds, he said, mentioning specifically smart cards and public key infrastructure (PKI), which is used to encrypt and authenticate data communications.

Some previous contracts have been put on the fast track, experts said.

"We've seen an acceleration of deployments of things that were happening before Sept. 11," said Rod Stuhlmuller, vice president of corporate communications at Fremont, California-based ActivCard.

Under a 2000 contract with the Defense Department, ActivCard is scheduled to issue 4.3 million new identification badges based on so-called smartcard technology that can store large amounts of data on an embedded microprocessor.

Biometrics -- security that relies on face, fingerprint or voice recognition -- is also in line to receive a big boost from the transportation industry and government sectors, said Raj Nanavati, partner at the International Biometric Group, a consultancy and systems integrator in New York City.