The big looks to get bigger

Linda Gooden of Lockheed Martin IT said the acquisition of most of Affiliated Computer Services Inc.' s federal business let her create a 2,000-person unit dedicated to business process outsourcing.

Lockheed's IT division banks on outsourcing for double-digit growth

Lockheed Martin Corp.'s IT division is aiming for double-digit growth, and the unit's president said that business process outsourcing is a big part of that strategy.

Linda Gooden, president of Lockheed Martin Information Technology, said that last November's acquisition of most of the federal business of Affiliated Computer Services Inc. allowed her to create a 2,000-person unit dedicated to business process outsourcing.

Business process outsourcing, or BPO, entails an agency turning over to vendors many back-office functions, such as invoicing, human resources, payroll, finance, procurement and customer service.

It also involves a contractor supplying the manpower needed for inputting data and the accompanying management processes.

It's a service that has been popular with commercial firms and state and local governments, but one that more federal agencies are starting to explore, Gooden said.

"ACS had an initial capability in that area, and what we plan to do is to leverage that into a new business area for Lockheed Martin Information Technology," Gooden said.

Dallas-based ACS had about a half-dozen major BPO contracts and several smaller task orders ? all totaling more than $100 million ? which Gooden's division inherited. The largest one is a deal to supply IT, personnel management, materials, administration and technical service to support the Defense Finance and Accounting Service.

In an unusual deal, Lockheed Martin acquired ACS' federal business minus some defense work, its state and local business and its student loan processing contract with the Education Department. ACS acquired Lockheed Martin's commercial IT business.

Gooden integrated ACS' federal unit into her division and created a business process outsourcing unit in February, consisting of 2,000 of her total 11,000 IT professionals.

The Bethesda, Md., company does not publicly disclose the revenue for Gooden's IT division, but IT work for the company accounts for more than $8 billion, or around 25 percent of total revenue, she said.

Lockheed Martin pulled in $31.8 billion in 2003 and employs 130,000 workers. The company has ranked No. 1 on Washington Technology's Top 100 list of IT contractors for a decade.

As for future business process outsourcing projects, Gooden said her division plans to bid as a prime contractor on the Federal Aviation Administration's automated flight service stations contract, which involves privatizing jobs at 58 of the agency's 93 flight service stations nationwide.

The stations are air traffic control facilities that provide briefings for pilots, en route communications and search and rescue services. They also assist lost aircraft and planes in emergency situations, relay air traffic control clearances, broadcast aviation weather, receive flight plans and monitor navigation aids.

Business process outsourcing might be a new line of business for Lockheed Martin, but it's not a new concept for the federal government.

Chris Ambrose, an analyst at IT market research firm Gartner Inc. of Stamford, Conn., said companies have been providing program- or mission-specific business process outsourcing to the federal government for years. The Education Department, for example, outsources student loan processing, and the National Flood Insurance Program outsources its claims processing, he said.

Ambrose also said BPO opportunities are growing in the federal sector because of the President's Management Agenda and revisions to the Office of Management and Budget's A-76 rules for competitive sourcing. Federal agencies also want to move their payroll and processing functions to standardized platforms.

Where once only commercial entities were outsourcing their human resource, finance, accounting and procurement functions, now federal agencies are looking to do so, he said.

"There are agencies such as the Office of Management and Budget looking to outsource their financial and personnel systems, and there are a number of others that are just beginning to talk about outsourcing," Gooden said.

"We see that as a large growth area because ? it allows us to couple our domain expertise with our IT solutions and provide this capability to the government."

Gooden declined to cite other specific contracts on which her division plans to bid.

According to Gartner, the global market for both commercial and government business process outsourcing is worth $131 billion this year and will grow to $173 billion by 2007. Ambrose said while opportunities for the service exist in the federal space, it's difficult to predict where they'll be, because the federal government has a slower pace of adopting IT outsourcing services.

The rest of Lockheed Martin's IT business also is strong, and Gooden said three recent wins are keys to the division's growth.

In January, the company won a nine-year, $700 million contract to provide environmental, administrative and research systems engineering services to the Environmental Protection Agency.

Last November, Gooden's division won a 10-year, $600 million contract to support IT requirements in the Air Force Pentagon Communications Agency. In October, it won a seven-year, $465 million contract to provide IT solutions and services to the Centers for Disease Control and Prevention.

"We were fortunate to win three large programs [over] the last year, so we feel pretty comfortable that our organic growth is continuing," Gooden said.

Staff Writer Roseanne Gerin can be reached at rgerin@postnewsweektech.com.

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