Procurement reforms reduce user costs

Mar 15, 1999

The integration of
the two vendors’ federal sales groups will let Compaq offer a wider range of products
than its top competitor, Dell Computer Corp.

Some observers say, however, that Compaq’s expanded size
might make it harder to stay competitive on pricing and support, while flexible at meeting
agency requirements and starting new programs.

Newgaard has worked for Compaq since 1985. He was director of federal sales and
marketing before his promotion to head the Reston, Va., federal arm.

Before coming to Compaq, Newgaard worked as a sales manager for the information systems
division of Philips Electronics North America Corp. of Knoxville, Tenn., and as a sales
representative for Lanier Worldwide Inc. of Atlanta. He received a bachelor of science
degree in business administration from the University of Tennessee at Knoxville.

GCN associate editor Bill Murray interviewed Newgaard by telephone.

What’s more

Family: Wife and two sons

Car: BMW convertible

Leisure activities: Skiing, scuba diving and time
with family

GCN: How has the Compaq
Computer Corp. acquisition of Digital Equipment Corp. changed the company’s federal
operation?

NEWGAARD: Not only do we now have a worldwide repair service, we also have a
substantial population of Microsoft Windows NT-certified engineers to help our customers
and channel partners.

Compaq started the transition several years ago by broadening its offerings from Intel
PC products to the NonStop Himalaya servers that were brought to market by Compaq
subsidiary Tandem Computers Inc.

The addition of the Digital Alpha products helps us out with the bigger quad-processor
servers that the market’s looking at in high-end technical computing.

The Alpha and Digital Unix technologies are key additions as well as a substantially
well-trained, customer-focused sales and marketing organization.

GCN: Should Digital
VAX and VMS users get ready to kiss their support goodbye?

NEWGAARD: No, it’s been assured. If you jump on our Web site, there’s
substantial documentation about Compaq’s commitment to support those users.

GCN: Isn’t
Compaq federal going to be somewhat bogged down in organizational restructuring this year?

NEWGAARD: No, absolutely not. That’s all behind us. We’re moving forward with
speed and a lot of enthusiasm.

GCN: After the layoffs last
fall, how well have the Compaq and Digital federal groups merged?

NEWGAARD: We had some reductions in work force and shuffling to reduce duplication of
effort in a particular city or in operations or administrative coverage and things along
those lines. That happened several months ago.

It wasn’t that we went through and significantly reduced the work force;
we’re remodeling it for efficiency for service to our partners and customers. I think
those efforts have been well-received.

Both organizations have had strong commitments to quality and to providing our
employees with an environment where they can grow both personally and professionally. Not
everybody has that when two companies come together.

GCN: Do you think you have a
realistic chance of beating Dell Computer Corp. in federal sales?

NEWGAARD: You’ll see that it’s pretty much neck and neck.

GCN: Why do you think Dell has had
such a stronghold in some agencies, such as the Treasury Department?

NEWGAARD: I don’t know that they have such a stronghold. Some of that may be
predicated on the contracts they were on.

If you recall, going back to the Treasury Department Acquisition and others, they were
mandatory indefinite-delivery, indefinite-quantity contracts, so that gives a vendor some
momentum going into a particular agency.

I believe I’ve seen Treasury get into a wider support of manufacturers over the
last six to nine months through the blanket purchasing agreements.

GCN: How are you doing with your
online ordering?

NEWGAARD: I don’t have that data at my fingertips. I think our Web site is
best-of-class. We are seeing high use of it for both ordering and information. A sales rep
can go online right away. Users can work on their quotations in a shopping-cart fashion,
just like other electronic commerce sites.

GCN: Why do you think agencies
are moving away from clone PCs, or what you call white boxes?

NEWGAARD: You see it on many of the procurements coming out—clearly there’s
an intent. Through the input stage, agencies either use guidelines or they don’t.

The residual value of a Compaq product in the marketplace has important ramifications
for seat management and leasing. You get a better return on your investment.

GCN: Is Windows NT scalable
enough and stable enough to satisfy mission-critical needs within federal agencies?

NEWGAARD: I do not know the answer to that. That would be better addressed to Microsoft
Corp.

GCN: But the products and
services that you now offer let you move beyond NT into Unix and other areas, right?

NEWGAARD: The DEC legacy systems have had a substantial penetration in agencies’
mission-critical systems.

GCN: Do you have any sense of
how your company will fare in Air Force PC buys?

NEWGAARD: We have a group of people focused on it, and we’ve been giving our input
to [the Air Force’s Standard Systems Group] about best practices that we see
displayed both commercially and federally.

We hope that Compaq will be in a position to provide support for our products.

GCN: Where do you see the trends
in procurement reform going over the next two years? Do you think things will swing back
closer to where they were two years ago?

NEWGAARD: Where do you think things were two years ago, as a reference point?

GCN: Before the maximum ordering
limits were removed, there wasn’t as much business going through General Services
Administration schedule contracts. More of it was going through IDIQ contracts.

NEWGAARD: I think there’s a lot of benefit in procurement reform for both the
customer and the contractor. It potentially reduces a lot of bidding and proposal costs
that were created years ago by the procurement system.

Reform also presents some unique marketing requirements, in that the decision-making
authority has been pushed down into the government organizations. It creates unique
support requirements for the government that they weren’t used to when they were
deploying common systems.

That’s going to have to continue to be flushed out as we move through the next
fiscal year or two, to receive the financial benefits given the reduction in the
government work force.

A lot of the increase that you see on GSA schedule business is just a shifting, if you
will, from the IDIQ world. That is not too terribly bad in any sense. It allows for a
quicker technology refresh—from what we see.

GCN: Is your business being
affected either positively or negatively by agencies’ year 2000 readiness work? Are
agencies ordering more or fewer machines?

NEWGAARD: It’s difficult to ferret out whether it is in response to year 2000 or
to planned technology turns. Certainly we’ve seen a lot of attention given to 2000
upgrades for desktop and server systems to ensure readiness.

We’re helping our customers identify any systems that we need to work with them
on.

GCN: Do most agencies have a
lifecycle plan for their PCs and servers?

NEWGAARD: I believe they do. If you check most agencies’ information technology
Web sites, they have a pretty detailed plan of public record.

For example, I believe chief information officer Gloria Parker has one up for the
Housing and Urban Development Department.

They’re all aggressively publishing those documents, so the public can see
what’s going on, as well as their industry partners.

GCN: Did you bid on both Army
PC-3 and Portable-3 directly?

NEWGAARD: I can tell you, no, we’re not bidding directly. [Intellisys Technology
Corp. of Fairfax, Va., bid Compaq products and won a share of PC-3.]

GCN: How important is it to you
to win an IDIQ contract like that?

NEWGAARD: We have a long legacy of supplying on IDIQ contracts, particularly to the
Army. It’s important that we work with the government in solving its IT needs.

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