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New Business Opportunities in
Homeland Security
Where are they and how to capture these
new business opportunities?
| "We are not a security
company but are intrigued by all the discussions related
to increasing spending on homeland security. What
kinds of new business opportunities are being
created? How do we get into this business,
particularly because we have never done business with the
government." |
There is no
consensus yet on the question if the world is a safer place.
But maybe that is not so important. What really matters,
particularly to general public, is the perception of
security. Therefore, even minor terrorist activities can
create the impression that the world is not safe. Plus, the
government increasingly talks about protecting Americans and keep
the homeland safe from terrorists. This is also one area
where the government has also not just talked, but also released
the funds. According to estimates by the Civitas Group,
federal spending on homeland security more than tripled from 2000
to 2004. We are currently spending over $40 billion and many
in Congress do not think that this is enough. The Civitas
Group forecasts that total spending on homeland security on a
global basis will be over $42 billion in 2005. All these
factors combined together mean that homeland security presents
several new business opportunities for businesses of all sizes.
(Related article: Virtual
border initiative creates additional business opportunities)
Since the
government cannot do most of the homeland security projects on its own, the contracts will
be awarded to the private sector. In 2004 alone, the total
value of the contracts received by the private sector from the
federal government is expected to
be approximately $8
billion. Because of the time pressures and degree of
complexity of these projects, most of the work was given to large
corporations that not only have the infrastructure to carry out
such massive projects but also have the clout in Washington
DC. But these corporations will not be able to do everything
on their own and will soon farm out a lot of the work to
sub-contractors, mainly small and mid-sized companies. And as small and mid-sized businesses
develop the skills and capabilities needed to serve the homeland
security market (and learn to manage government contracts) and less complex projects come along, the future
contracts will be awarded directly to companies of all sizes. (Related
article: Homeland
Security new projects)
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It should also be
noted that so far the vast majority of the spending has come from
the federal government. In fact the private sector is just
starting to catch up. Roughly three-fourths of our infrastructure
is controlled by the private sector and since this is not a
value-creating expense, they have been less enthusiastic about
it. But most corporations agree that they will need to do a
better job of protecting critical infrastructure like chemical
plants and nuclear power stations. In addition to that we
also need to secure our IT infrastructure since even a brief
breakdown in the system will not only create chaos but also be
very expensive. Or in other words, if you do not want to bid
on federal projects, you can simply wait for the private sector
spending to kick in.
How can you participate in the homeland
security business?
- Develop in-house capabilities:
If you are a business already active in some aspects
of security, it is much better to add other
capabilities. You can leverage your existing brand
and relationships to compete for homeland security
related projects.
- Acquire capabilities: In
my opinion, this is the preferred route if you are new
to homeland security. The projects are being
awarded right now and there is no time to come up the
learning curve. Additionally, almost everyone will
seek experts to work on these projects since mistakes
are simply not acceptable.
- Take a portfolio approach:
If you do not want to be operating a homeland security
business (with its added hassle of working with the
government bureaucracy), you can identify the strong
players and take a ownership stake in one or more of
them.
- Change the paradigm: The
important point to note here is that homeland security
in today's world is not going to be effective using
traditional means. To protect a large country like
ours, we will need to exploit technology. There
are some technologies already available but others need to be
developed. For example, we need to develop
technologies that will allow us to detect suspicious
activities without tying up human resources. Which
means we need sensors and detectors of all types and
develop data-mining techniques.
Plus, we need to develop a range of technologies to
minimize the damage if a terrorist attack does
happen. All this will happen by using existing
technologies and marrying them in interesting ways to
produce results. If you are a strong technology
player, this is another innovative route to
participation.
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Is it difficult to work on government contracts?
Yes, a lot more
difficult than the private sector, but not impossible. You
have to learn to work with the government. Here
are a few tips to keep in mind when working with on government
contracts:
- Follow the prescribed procedures. The
bureaucrats are not trained to be flexible or to exercise
individual judgment.
- Hire a team of people who have experience in
working on government contracts. All leadership roles should
be given to those who know how the system works.
- If you do not have the right connections in
Washington, you need to find them and then develop the
relationships. If you are short on time, it is simply
best to hire a dealmaker that has experience in bidding on
government contracts.
- Keep the bureaucrats happy by keeping them in
the loop and respecting their enormous power.
Recommended link: Maritime
security business opportunities
Questions,
comments, feedback, and suggestions
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