Reinventing itself

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"Direct to the top"

Just a little more than four years ago, GTSI Corp. was struggling, beset

by financial difficulties and a stream of top talent heading for the exit.

But in the ensuing years, the company turned its fortunes around and established

itself as the most consistent reseller in the federal marketplace.

Now its trying to remake itself again. Commodity sales of PCs, workstations

and printers its stock-in-trade since it opened its doors in 1983 are

still a big part of the companys business, but razor-thin profit margins

dont hold much promise of growth. So the company has decided its future

is in solutions.

"We see a definite split in the market occurring," said Joel Lipkin,

GTSIs senior vice president of sales and customer support. "Theres the

commodity-driven side, and we think we still play pretty well in that. The

other side and its the one we see as the faster-growing is the product-solution

space. Rather than just take delivery of a product and integrate it themselves,

customers are increasingly asking us to turn a working solution over to

them," he said.

GTSI isnt doing too badly now. Total government sales were more than

$668 million for the

companys 1999 fiscal year, which ended Dec. 31,

1999 a 10 percent gain on the $606 million it posted for the previous

year. And it has been a consistent top 10 player on the General Services

Administration schedule list, ringing up the eighth-largest sales on the

schedule with more than $186 million for the 12 months between July 1, 1999,

and June 30, 2000.

GTSI has performed consistently at a time when many other resellers

have not. When computer sales slumped $12 million in the second quarter

of the fiscal year because so many agencies had rushed to buy Year 2000-compliant

computers in the first quarter, GTSI was still able to boost profits. Some

resellers not only lost money but abandoned the federal market completely.

Unfortunately, GTSI is still viewed mainly as a reseller. The company

suffers in comparison to the likes of Dell Computer Corp. (No. 1 on the

GSA schedule list), Gateway Inc. (No. 5) and Micron Government Computer

Systems (No. 6) because it doesnt have the same direct marketing muscle,

according to Mark Amtower, president of Amtower and Co.

"Its always dependent on the development dollars of other companies,"

he said. "[GTSI] cant spend as much on advertising and marketing as Dell

and the others can."

Thats all the more reason for GTSIs relative strength to be seen as

something of a triumph, especially given its perilous state in the mid-1990s.

Observers give much of the credit for the companys turnaround to Dendy

Young, chairman and chief executive officer.

GTSI hired Young at the end of 1995 and charged him with refocusing

the companys efforts. The founder of Apple Computer Inc. reseller Falcon

Microsystems Inc., which he sold to GTSI, Young has overseen a makeover

of the company from a reactive organization to one that aggressively looks

for sales.

Quite frankly, Amtower said, GTSI was a company "full of weenies" 10

years ago, but it has since made a complete about-face. Thats partly because

of the fact that it has had to adapt to changes in government procurement

during that time, but Amtower thinks Young would have forced those kinds

of changes anyway.

What has happened to the GSA schedule parallels the kind of change that

has occurred at GTSI, said Lipkin, particularly with the GSAs focus on

blanket-purchase agreements. BPAs have allowed GTSI to work more closely

with its customers, which is similar to the close relationships systems

integrators have with their customers on indefinite-delivery, indefinite-quantity


To accommodate this future, GTSI made major investments in its infrastructure.

It built a 220,000-square-foot manufacturing and distribution center that

allows closer control over the configuration of the systems it provides

to its customers. The center also enables the company to offer value-added

services such as customized disk image loading and specialized military

packing arrangements.

The company also made a crucial step, Lipkin believes, when it became

certified under the International Standards Organization 9000 specifications,

a set of quality management and assurance standards that are an important

competitive tool.

All told, Lipkin said, "We think we are light-years ahead of other resellers.

We also think we have a major advantage compared to the typical systems

integrator because we have a much larger scale of operations that can support

multiple programs."

The problem is that not enough people may know that. One of the biggest

challenges for GTSI in the near future will be overcoming the old image

of the company as simply a reseller, Lipkin said, "and explaining to the

world that GTSI is now a solutions provider."

Robinson is a freelance journalist based in Portland, Ore.

About the Author

Brian Robinson is a freelance writer based in Portland, Ore.


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