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VARs still waiting for IT stimulus dollars

Most IT stimulus dollars won't start flowing until October, although some dribbled through into banking and utilities security projects.

Recession-battered solutions providers are eager to get their hands on the billions of dollars in federal stimulus money allocated for information technology projects, but most say they've seen little or no upside yet.

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Under the federal stimulus plan, there is $19 billion available for electronic health record (EHR) upgrades. There are additional billions out of a total $787 billion in stimulus spending available for expanding broadband Internet service and other IT-related projects. But, even though the federal stimulus money was approved in February, much of it hasn't started flowing yet.

"We haven't seen cash for clunkers, if that's what you mean," laughed Peter Anderson, president of Bayshore Technologies Inc., a Tampa, Fla.-based solutions provider.

For example, the much-touted EHR effort is still hamstrung by a lack of key definitions and standards. To get access to the federal stimulus money, users have to demonstrate "meaningful use" of electronic health records -- a definition that has proven elusive.

The two big, broadline distributors -- both of which launched programs to help VARs track and find IT-related stimulus funds -- confirm that perception.

"Our information showed that the stimulus funds wouldn't really start hitting end users' hands until 2010, and that seems to be holding true," said Barb Miller, vice president of government technical and integration services for Clearwater, Fla.-based distributor Tech Data Corp.

There are some exceptions to that rule. Miller said she's seen some projects continued rather than gutted because management expects stimulus money to come through.

"I think they've kept going and have not laid off people in anticipation of that," she added.

Ironically, Miller said, some money appears to have flowed into hard-hit financial services companies.

"We're seeing some bank refreshes through our resellers … so some of the bank stimulus money seems to be moving, [probably because of] some of the mergers that occurred out of the bailout," she said.

When one bank acquires another, the two data centers need to be bridged, for example.

Bob Laclede, vice president of business development for Ingram Micro Inc. U.S., said people have gotten ahead of the themselves, but there is some movement.

"We started to see broadband grants going in the last few weeks, and we're seeing some public safety grants going," he said.

Laclede agreed with Miller that many IT-related projects that might have otherwise been scrapped because of the recession were put on life support in anticipation of stimulus funds.

The stimulus has "been hyped so much, some of it is not reality," but there will be VAR opportunities, said Mike AtLee, practice Leader for Avnet Technology Solutions' GovPath practice.

Prepping for the IT stimulus spend

To capitalize on IT spending, VARs must get their documentation skills in order, AtLee said.

"We have a partner in California that won some business backed by stimulus money," he said. "They won, but the paperwork was incredible. The Feds say you can spend it, but you have to spend it in the right fashion. You have to back up what you said you'd do, and it's a lot of work."

AtLee expects to see some stimulus-related IT money spent when the new fiscal year starts in October, with an increase in the second quarter before things level out. Given the government's energy-conscious stance, VARs should brush up on green IT and cloud computing, he said.

Up until now, most of the spending has gone to "shovel-ready" construction projects, AtLee said.

Most people see shovel-ready projects as low-tech construction like, for example, when buildings go up with broadband pipes in place. VARs able to handle non-PC technology like industrial controllers and sensors might see benefits.

Security mandates at utility and water sites are opening up opportunities for VARs with expertise in these high-tech sensors and industrial controllers, said Martha Daniel, CEO of Information Management Resources Inc. (IMRI), a Laguna Hills, Calif., VAR that does a lot of government work.

"The one area I've seen money come into is cybersecurity, mainly in water districts, etc.," Daniel said. "They're starting to get money to deal with concerns around their industrial controls systems."

IMRI has responded to four proposals in the last 30 days, she added.

VARs' workloads also depend on their geographical coverage, because the recession has hit some states harder than others. IMRI, stopped doing work for the state of California months ago because the company was having a hard time getting paid, Daniel said.

Near-term opportunities

Tech Data's Miller cautioned VARs -- especially those with government practices -- not to write off the rest of this fiscal year because the last days of summer tend to be the time when agencies make sure their current (non-stimulus) budget is spent.

"August through September is the heavy spending," she said. "You won't find anyone leaving Washington or taking vacations then."

Pre-stimulus, the federal government's IT budget is $75 billion for the current fiscal year.

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