There was an article in the Business Section of Sunday's San Francisco Chronicle entitled "Selling to Uncle Sam." The basic gist of the article is that while startups used to be reluctant to sell to the United States Government, as the government has increased its technology spending it has become an attractive customer for all infotech companies, big and small alike. According to the Chronicle, the Department of Defense will spend $364 Billion on technology products and services in 2003 (going to $380 Billion in 2004) and the Department of Homeland Security will spend $28 Billion in 2003 (going to $36 Billion in 2004). That's a whole lot of technology products and services.

My experiences over the last year or so definitely reinforce what the article suggests. Particularly in the wake of 9/11 and the "war on terrorism," the Federal Government is working hard to integrate information gathering, sharing and analysis across and among each of the departments. That is a huge project. Add on top of that the security you need to protect that massive store of data, and you've got a whole lot of technology dollars being spent. I would say one thing, however. It remains infinitely easier to sell to the Federal Government as a subcontractor to one of their trusted suppliers than to try to sell direct. But for those startups that have managed to find the right channel into the US Government, the payoff is significant.

Update: For an alternative point of view, check out this article in today's San Jose Mercury News. The article argues that despite all the Federal money out there, it is still really tough for startups to tap it and lots of startups die trying. Which is precisely my point about partnering with entities that already have access.

You can also get lots of great info in Owen Thomas' "How to Sell Tech to the Feds."