Government’s Appetite Grows as Sales to Industry Shrink : Uncle Sam Is Biggest Buyer of PCs

The Washington Post

With little fanfare but lots of money, the U.S. government has become the nation’s single largest purchaser of personal computers, according to government and industry sources.

While sales of the machines to companies and individuals have slumped, federal agencies are snapping up personal computers by the tens of thousands. The Navy, the Air Force and the Internal Revenue Service are just a few of the agencies spending millions of dollars on personal computers.

“By 1990, every white-collar employee (in the federal government) will have a (personal computer) or intelligent terminal,” Ray Kline, former associate director of the Government Services Administration, said recently.

The dependence of the nation’s 1.4 million white-collar federal employees on information, flexible procurement procedures and the opportunity for big volume sales have helped make the federal government an attractive new market segment for the struggling personal computer industry.

Revolutionary Changes

“Our perspective is that (the personal computing) part of the market will continue to grow significantly,” said William Rouse, director of market planning and communications for Wang Laboratories federal systems division. “Ultimately, we think that every federal employee will have a workstation on their desk.”


Government managers argue that shrinking staffs and increasing demands for productivity will assure that personal computers will revolutionize federal offices.

“There will no longer be a whole big staff to run an analysis,” said Esther Georgatos, who runs the information technology center for the Veterans Administration. “When I first started here, we had one guy who had to prepare a monthly report, and he extracted all the information manually, assembled it and then gave it to a secretary to type up. With the personal computer, we had him go from 16 hours a month preparing a report to maybe an hour a month.”

One reason that suppliers are drawn to the government sector is that awards to suppliers are not usually based on price alone, as is often the case in the private sector, where personal computers are viewed as commodities. Government agencies also consider such variables as the expansion capabilities of the system, service, support and other factors. Thus, profit margins have tended to be higher.

In many respects, the federal government is playing catch-up to the private sector in the purchase of personal computers. When personal computer sales were booming over the last three years, the government was just beginning to set in place its procurement policies for the machines. Now, according to one Office of Management and Budget official, “all the mechanisms are in place” for major procurements.

No one knows precisely how much of the government’s roughly $15-billion data-processing budget goes for personal computer hardware and software purchases. In fact, officials at the GSA, the OMB and industry consulting groups couldn’t say how many personal computers there are in the government. One GSA estimate put the number of the government’s personal computers at 37,000 last year, but the agency conceded that that figure might be a fraction of the actual total.

“We think, based on a survey, that there may have been around 100,000 PCs at the end of 1984,” said Francis A. McDonough, a deputy assistant administrator at GSA. “But, in truth, we really don’t know.”

Part of the reason for that is that agencies have been given discretionary budgets for data-processing purchases ranging from $2.5 million to $10 million.

Several recent contracts for IBM-compatible personal computers, government officials and industry observers contend, have made the government the largest single purchaser of the machines this year.

“You only have to look at a representative case,” asserts Robert Dornan, an analyst with International Data Corp. in Washington. With one Zenith Data Systems contract for the Defense Department, “the original estimation was that they’d need 10,000 of those things. They have since gone back and requested up to 50,000 PCs.

“There’s a big IRS procurement now in the offing, with an estimated 200,000 lap-top computers expected to be purchased,” he added.

One other measure is the increasing attendance at trade shows targeted to government users. The Federal Computer Conference being held at the Convention Center here last week had about 24,000 visitors and 300 exhibitors. In contrast, in 1981 attendance was 13,000 and exhibitors totaled 67.

While IDC’s Dornan contends that civilian agencies aren’t “quite as up as (the Pentagon) in consolidating their requirements,” they will be procuring proportionately more of the machines over the next two or three years.

"(Next year) will be a big (one) for the federal government,” asserts Tim Bajarin, a personal computer industry analyst with Creative Strategies.

“Over the last two years, as it really got steamrolling,” Wang’s Rouse says, “the agencies had to take another look at how they were buying PCs. In the past, people would just buy them one at a time out of the stationery budgets.

“In the last year, though, we’ve seen a move away from individual and departmental-wide purchases to agencywide purchases,” so that agencies can be assured that their machines are compatible with one another and capable of running the same software.