Government increases spending on identity verification; start-ups to benefit

Here is good news for identity-verification start-ups: The U.S. government plans to spend $345 million next year to verify identities against a backdrop of missed deadlines on security goals and continued concerns over terrorism. An Input report says that spending is expected to grow 6.2 percent annually to about $439 million in 2012. Input is a Reston, Virginia-based research firm. The growth in spending will generate revenue for security start-ups, but it could also spur interest of large government contractors in buying start-ups in areas such as smart cards, biometrics, RFID, and speech recognition. Red Herring’s Cassimir Medford writes that the U.S. government is so behind on a Bush administration plan to upgrade secured access to federal facilities that it will need immense help to catch up, according to Chris Campbell, the author of the report. The Input report, published last Thursday, said the government cannot handle the many required technologies and services, giving Microsoft, EDS, BearingPoint, and Johnson Controls a chance to benefit. “All of the big guys like the systems integrators will be involved and they will be looking for small specialized firms as subcontractors or even acquisition targets,” Campbell said.

The government’s recent interest in RFID spurred a number of acquisitions, says Campbell, and the same will likely to happen as the government embarks on upgrading its own physical security. The Bush administration issued a directive in 2004 to get rid of outdated and inadequate security governing ID checking at government agencies and departments. The deadlines set were ambitious and the agencies will not make the first deadline, which comes at the end of this month. Medford quotes the report to say that, with the pressure on, the government is more likely to outsource huge chunks of these projects to vendors. “The government is always grappling with funding and personnel issues and that gets hammered down more as you get into critical issues like IT security,” Campbell said.