US Army Enlists Storage

The United States Army has awarded procurement contracts for servers, storage, and software to four companies -- Dell Computer Corp. (Nasdaq: DELL), Hewlett-Packard Co. (NYSE: HPQ), GTSI Corp., and Lockheed Martin Corp. -- that could be worth as much as $500 million over three years (see HP Wins US Army Contract).

The U.S. Army Information Technology Enterprise Solutions (ITES), Functional Area 1 (FA-1), Enterprise Hardware Solutions (EHS) (ITES-FA1-EHS) procurement contract [ed. note: whew!] is part of an Army-wide initiative to consolidate and merge disparate systems into one, integrated architecture; and storage technologies are a large part of the equation.

The competitive contract was set in motion earlier this month and is initially set to last three years. There is also a possibility for two two-year extension periods.

Of course, the keyword here is "competitive": The Army offered the same procurement contract to each of the four companies, and it will have to get competitive quotes from at least three of the companies every time it decides to buy a piece of equipment.

The $500 million figure includes sales by all four companies. So while one company may make off with a load of loot, others could come out of the deal with only the minimum contract amount of $10,000.In a press release issued this week, HP said it sees the contract as a gigantic opportunity (see HP Wins US Army Contract). While the company has done business with the Army for 60 years, this is the first time it has had the opportunity to sell its whole line of storage products, including its SAN, NAS, and storage software management offerings, says Alan Horwitz, HP's director of advanced technology sales to the federal government.

"We are thrilled that this is the first direct vehicle that HP has with the Army to supply our full suite of storage hardware, software and services," Horwitz writes in an email. "The ITES contract will be the primary vehicle for direct storage sales into the Army." The contract also offers HP the opportunity to compete to sell a broad range of its other products.

Horwitz is confident that HP will fare well against the competition. "HP has sold a great deal of enterprise and business-class storage to the Army," he writes. "This contract will permit us to continue to supply the Army with a much wider array of world-class storage products and services."

HP is probably also hoping to land a portion of the Army's next IETS procurement contract, which is also worth $500 million. While the first phase of the contract covers commodity-based technologies, the second phase, dubbed FA-2, Enterprise Mission Support Services Solutions (EMS3), will focus on services. The four companies that have been awarded the first contract also have the opportunity to compete for the second phase, which will be awarded in a couple of weeks.

"You could compete in both functional areas and win contracts," says Lee Harvey, special assistant to the Army's program executive. "We've also encouraged [the service companies] to procure the hardware they need from these four guys, so there should be a lot of industry partnership there."So how did HP get into the running for the contract? "The army is such a large organization, we were looking for pretty much world-class companies," Harvey says "We were looking for OEMs particularly... For somebody who can support us wherever we go, and who can give us a whole range of products."

But he adds that while the Army is only awarding contracts to global companies with very broad product ranges, smaller companies and pure-play storage players will also have an opportunity to get in on the action as subcontractors.

Eugénie (B&S2-NWY28) Larson, Senior Editor, Byte and Switch