- By Tania Anderson
- Mar 28, 2004
Several federal systems integrators are shuffling their company structures to improve communication with their government customers and evolve within the changing marketplace.
Reasons for the shuffling vary. Some company officials cite changes in their market, the competition and their own internal communications needs. They also consider their ability to communicate with customers. Some changes will give government customers a better sense of whom to contact in the company if there's a problem or if they wish to talk about the contract's progress. New executives or mergers inspired other reorganizations.
Large and midsize companies such as Science Applications International Corp., EDS and ITS Services Inc. are going through major reorganizations — officials prefer to call them transformations — that they expect to change the companies' standings in the government marketplace and their internal makeup.
SAIC's reorganization, announced Jan. 12, was one of the first orders of business for new chief executive officer Kenneth Dahlberg, who joined the San Diego-based firm last November. The company, which has a large presence in McLean, Va., had posted $6 billion in annual revenue for the past several years.
The company's size and diversity made it strong, but also created confusion, according to some industry observers. Sometimes different units would compete for the same contract unknowingly.
SAIC "looked disjointed, but it was an academic approach of letting 1,000 flowers bloom," said Bob Woods, president of Vienna, Va.-based Topside Consulting Group LLC and former commissioner of the General Services Administration's Federal Technology Service. "They made it work and they grew well, but it's not a textbook model of organization."
SAIC officials were not available to talk about the reorganization plans despite repeated requests.
Officials at the employee-owned research and engineering company said in a statement that the reorganization will consolidate federal and Defense Department business segments into business units, resulting in fewer but larger units. The reorganization began Feb. 1.
"The reason for this realignment is they want to go after these large contracts, and they want to double the size of the company in five years," said Harold Youra, president of Alliance Solutions LLC, a Baltimore-based consulting firm. "This realignment allows [SAIC officials] to take resources and pool them together."
One of the goals of SAIC's reorganization, Dahlberg said in a statement, will be better communication with customers. That is a common theme among other reorganizations in the systems integration world.
American Management Systems Inc. officials reorganized during the past two years in hopes of turning business around, before deciding to sell the defense and intelligence business to CACI Inc. and merge the rest of the company with a much larger Canadian company, CGI Group Inc.
Donna Morea, executive vice president of AMS' public-sector group, knew that the Fairfax, Va.-based company had to make a change after she had a conversation a few years ago with the chief information officer of Kentucky, where AMS had been doing some integration work. Despite being happy with the company's work, the CIO wanted to be able to talk to the president or CEO if she had a question about the work being done.
"That stuck in my mind and has been the client's call to arms," Morea said. "I thought, 'We need to make it easy for our customers to interact with AMS at the enterprise level.'"
The company started consolidating the public-sector group in April 2002.
"What our transformation was about was bringing together and unifying all of the groups that served the public sector into a group with a single mission and focus," Morea said.
Although the landscape will change again after the merger and divestiture deals are complete later this year, the new organization has been an improvement for the company because all the pieces that served the public sector are now grouped together and organized under one heading, she said.
Now that the state and local group and the federal defense group are working together, there's more collaboration on work being done for government customers and more ideas being brainstormed, she said.
The origin of organization: EDS evolves with its market
EDS' decision to take on an internal reorganization was based on what company officials saw as an evolving marketplace.
It was late September 2002 when officials at the company's headquarters in Plano, Texas, realized things had to change. They announced Sept. 18, 2002, that revenue would be down 5 percent compared to the previous year, a figure lower than the company's earlier earnings forecast. Officials blamed the downfall on continuing softness in the IT services sector, and the stock plummeted from $36.46 to $17.20 in one day, more than 50 percent.
"Things were going very well prior to that, and the market was doing very well, but the market slowed down," said Allen Hamood, senior director of strategic planning at EDS. "What that made us do is step back and look at our strategy, look at our competitive positioning, look at our cost structure, look at our capabilities and really refine them, and go deeper as both the market was slowing and the competitive landscape was increasing."
The company's plan rested on three priorities: to get greater cost efficiencies, increase organizational effectiveness and strengthen its strategic competitive positioning.
Similar to AMS, EDS consolidated several lines of business into three main groups — a global sales and solutions group, a portfolio management group and a delivery group — a move mandated by Mike Jordan, EDS' newly appointed chairman and CEO. Former CIOs head each of the three groups.
"The client wasn't always certain who to call and how to get the results they wanted," Hamood said. "The first thing [Jordan] said was, 'We need to have one face to the client.'"
The restructuring cost $334 million last year, and by the end of this year, EDS will have 5,200 fewer people. Hamood said the effects of the changes are already being felt with a stronger balance sheet and core business. But the process has a way to go.
Next year "and beyond is what we call our growth [period], where we'll really start driving growth into the EDS operating model," he said.
Anderson is a business writer in Arlington, Va. She can be reached at [email protected]