20 top systems integrators

There are no free lunches here: Systems integrators in the federal market have earned their top spots through years of planning, investment and preparation. Led by Computer Sciences Corp., which climbed from fourth place in fiscal 2001 to first in fiscal 2003, the companies all have undertaken sweeping — and sometimes tumultuous — projects in recent years.

But achieving and maintaining success is not simple, officials at the companies said. As the disclaimer on any investment prospectus states: Past performance is no guarantee of future results.

Likewise, although a good track record is essential for continued success, it is no guarantee. Systems integration is an ever-changing playing field. Company leaders have to read the market, stay ahead of customer demands, keep up with changing technologies and stay on the lookout for good partner companies.

And even bad experiences, such as CSC's struggles with modernization projects at the FBI and the Internal Revenue Service, can turn into positive ones for companies that are willing to learn from mistakes.

"Most of those situations, when you finally get down to looking at it, turn out to be as much a matter of something wrong on the government side as on the contractor side," said Phil Kiviat, a consultant with Guerra, Kiviat, Flyzik and Associates Inc. "Generally, it is something to do with a requirements change or a requirements misunderstanding, something like that. It very, very seldom is a one-sided thing."

Smart company leaders, though, strive to prevent similar problems in the future, he said. "These are serious things," Kiviat said. "Companies are very concerned about it for past-performance implications."

Officials at Eagle Eye Publishers Inc. came up with the top integrators by measuring orders on certain industry codes that the firm's analysts considered to be systems integration. The boundaries between systems integration, product integration and other information technology services are not always sharply defined, however. That is why some surprising names, such as hardware developer Dell Inc. and reseller GTSI Corp., appear on the list. Changing definitions can allow companies to be listed.

Here is a look at the stories behind the successes of the top five integrators.

1. Computer Sciences Corp.: In for the long haul

CSC takes the list's top spot, with $3.1 billion in sales, thanks to vision and long-term preparation, said Paul Cofoni, president of the company's federal sector.

"This doesn't happen in a year," he said. "These kinds of results end up being the consequence of years of planning and implementation of plans. When we took a look at our marketplace some years ago, the one obvious need we saw was the need for the government marketplace to move toward best practices."

CSC has a thriving commercial business, Cofoni said, so when he took over the federal side, he formed a consulting practice to tap that private-sector expertise.

"We've built it over the last two years," he said. "We started bringing our commercial consulting people over to the federal side of the business. The purpose was to take the learning we've had over on the commercial side" and apply it to federal business. Commercial practices such as e-business have become increasingly important in the federal world, he added.

About 300 people are active in the consulting practice now, but Cofoni expects that number to grow to 2,000 by 2007.

The growth is rapid, he said, "but that's what we need to do. Today I have 40,000 people working in the federal government."

"We haven't just turned [the consultants] loose," he added. "We've married them with a group of federal people who were, by their own rights, consultants. So, it's a blended operation, not just commercial consultants transplanted into federal."

Predicting the future is difficult, but Cofoni said he believes that he and other company officials have made the right choices during the past few years. "We made some course corrections, but, more or less, the things we had forecast are starting to happen," he said. "Some things are happening slower than we would have expected."

For example, the government's move toward outsourcing work through competitive sourcing has been slower than he had expected, Cofoni said.

"It'll end up going all the way," he said. "It's just a matter of time. The largest impediment at the time is that people working as civil servants in government have a fear about what it means for them, and the organizations that represent them represent that fear. I think we have to get over that fear about 'What happens to me?' "

2. Northrop Grumman Information Technology: Smart shopping fuels growth

Northrop Grumman Corp.'s systems integration activities come from the company's IT and Mission Systems divisions. They represent a decade of transformation at the company, said Jon Korin, director of strategic development at Northrop Grumman IT.

The company was primarily an aircraft manufacturer until the early 1990s, he said. Now, it rakes in a third of its $28 billion in annual revenue from IT-related work. Eagle Eye's data show that $2 billion of that comes from integration work.

Northrop Grumman IT leaders paid attention to how the Defense Department was evolving, he said, and they began making acquisitions to meet those emerging demands. Important acquisitions included TRW Inc., a venerable integrator, in 2002. Before that, the company had acquired Logicon Inc., Federal Data Corp., Sterling Software Inc.'s federal operations and Litton Industries Inc.

"I think we've pretty solidly established ourselves," Korin said.

The strength that company officials built through the IT-oriented acquisitions played a role in the company's September 2003 win of the $281 million Defense Integrated Military Human Resources System (DIMHRS) contract, he said. The company's role in DIMHRS is to develop and implement a sweeping human resources system to replace 88 existing systems.

"It sort of had everything going for it," he said. "We have a big presence in the DOD in general. We have a pretty strong legacy in HR and financial systems in DOD." And with a large implementation of PeopleSoft Inc. Human resources software at the Treasury Department to point to, the company also had a solid past-performance record, he said.

Korin has deliberately spread the company's activities across five market segments, including government, he added. "It gives us good portfolio balance if budgets shift around," he said. "We're less vulnerable."

3.Science Applications International Corp.: A matter of discipline

Science Applications International Corp. has held the No. 3 spot for three years, and officials attribute their success to years of preparation.

SAIC executives have developed tight disciplines to govern the work of various internal organizations, and they have validated that work by evaluating those organizations using the Capability Maturity Model (CMM) or Capability Maturity Model Integrated (CMMI) systems.

Those ratings, which agency officials are increasingly interested in and writing into contract requirements, show that officials at a company have put thought and planning into the processes they use in software development and integration work, said Duane Andrews, president and chief operating officer of SAIC's federal division.

Based on an outside auditor's evaluations against criteria maintained by the Software Engineering Institute at Carnegie Mellon University, organizations receive a rating from one to five, with five as the best score.

"We have a lot more fours than we have fives, but we're talking about thousands of software developers in those ratings," Andrews said. "We've proven over and over again to ourselves, and I think to the customer, that strong CMM and CMMI qualifications, when they're used, really do enhance the quality of the product."

SAIC is hardly the only integrator to boast of CMM or CMMI ratings, of course. For SAIC, though, the ratings help individual units stand out in the eyes of agency customers, he said. The company is a diverse amalgamation of technology development and integration, among other practices.

Andrews said he keeps the company focused on larger opportunities to make full use of SAIC's size and breadth. About two-thirds of the company's business comes from DOD, he said.

"Those agencies that don't have the higher-end integration opportunities, you won't see us bidding there," he said.

4. EDS: Making experience count

Kevin Durkin, senior vice president of sales and marketing at EDS, said the company accomplished its fourth-place ranking through experience — including troubled engagements such as the Navy Marine Corps Intranet, which could have been disastrous had company officials not learned from their mistakes with that experience.

In serving as the prime contractor of the NMCI project, EDS officials have weathered their share of bad publicity. But Durkin said they have been able to turn the experience into a plus.

"We're doing one of the largest desktop outsourcings ever done" at NMCI, he said. "It has been an incredible experience for EDS. What we've been able to do is leverage that knowledge. It has not been a drag at all."

The company also has benefited from having an extensive

private-sector portfolio, including large customers such as General Motors Corp., he said. As federal agencies have increasingly adopted commercial practices, EDS officials have been ready to adapt.

In 2003, "things were changing rapidly," he said. "The government was going to performance-based [contracting]. In the private sector, we're used to that, and in the government, it wasn't the norm."

Performance-based contracting means that customers set goals for a project, and the contractor team must figure out how to meet those goals. Unlike more traditional contracts, in which customers simply order a list of tasks and products, performance-based contracts require the contractor to act as a partner with the agency.

"We really listened to the client and what they're trying to achieve," Durkin said. "What's happening in government, [which] EDS is really well positioned for because we've been doing it for 30 years, is large-scale enterprise integration."

But EDS still benefited from some shrewd preparation, he said. In 2001 and 2002, officials reorganized the company so that all the activities that involve customer interaction were performed by the same internal group.

"It's working great," he said. "We have a team approach and everyone on the team is pulling in the same direction."

5. Dell Inc.: Putting services on the menu

Dell Inc.'s name on a systems integrator list — with $822 million in sales, qualifying the company for fifth place — may seem surprising. But officials at the computer developer have created an active professional services division that continues to grow, said Tom Buchsbaum, vice president of the company's federal systems.

"Dell's direct [sales] model, which gives us a lot of direct contact with customers every day, gave us an intimacy with the customers that you wouldn't find in a company that is just shipping product," he said.

Company officials have always tried to identify customers' needsbeyond mere products and meet those needs, Buchsbaum said. But even with that emphasis, the move into services was gradual and has been more obvious in foreign countries serving U.S. outposts.

"A very large portion of our federal government opportunities are outside the contiguous U.S.," he said. "They do require some logistics, capability and reach that are outside of what you'd typically consider a box provider having. We have customers [who] can't go without support."

Only recently, though, have company officials emphasized developing the services side of the business, Buchsbaum added.

"We've consistently offered services in one form or another, but the focus had always been very close to the products themselves," he said. "It's in the last four years that Dell has put a lot of focus on ...services in the field that go far beyond the break/fix arena."

Now, company officials are learning to negotiate the ever-shifting world of competition and cooperation with other firms, he said.

"If I had to be an integrator and be tied to the kind of products and supply-chain engine that Dell has, I wouldn't see that as being a constraint at all," Buchsbaum said.

But customers usually need solutions that take more than one vendor to deliver. "In one opportunity, we may be best buddies with the provider of the equipment, and in another opportunity, we may be bitter competitors," he said.


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