A bigger slice:

A bigger slice:<@VM>WHO's WHO: The list<@VM>High costs drive new Medicaid outsourcing<@VM>New kid on the outsourcing block<@VM>Who's buying now?<@VM>Homeland market takes off at last

How we got the numbers

Washington Technology's list of top systems integrators in the state and local government market was compiled by Federal Sources Inc. of McLean, Va.

Because few companies specifically track or provide precise revenue figures for state and local work, FSI obtained its information using a variety of means and sources. These included research and analysis of public domain information, such as annual reports, Securities and Exchange Commission filings and press releases, as well as discussions with the companies on the list and other knowledgeable representatives within the market.

FSI, a subsidiary of Washington Management Group Inc. of Washington, provides intelligence on the public-sector technology market. Its clients include government contractors and a number of state and federal agencies.

"Video tolling and e-ticketing are big opportunities for us," says Dave Ross, managing partner of Accenture's U.S. government client group

Ricke Steele

This year, the players may be the same, but the game has definitely changed

The roster of players might be the same as last year's, but it isn't business as usual in the state and local government market. Many systems integrators, even those holding strong positions, are pushing into new lines of business as a way to enlarge their slice of the state and local pie.

Accenture Ltd. is expanding aggressively into the transportation arena with smart-card and video technologies. The contractor recently proposed to the Los Angeles Metropolitan Transportation Authority an "e-ticketing" solution that would let commuters use a single card to pay for all modes of public transportation in the greater metropolitan area.

"Video tolling and e-ticketing are big opportunities for us," said Dave Ross, managing partner of Accenture's U.S. government client group.

IBM Corp. is eyeing Medicaid-related work in the booming health care sector. Northrop Grumman Corp.'s Information Technology unit intends to expand its footprint in the criminal justice arena.

The new CGI-AMS unit, created last year by Montreal-based CGI Group Inc.'s purchase of American Management Systems Inc., is poised to tackle major IT and business process outsourcing jobs in areas such as health care. Before the purchase, AMS didn't have the resources to compete for the mega outsourcing deals, said Mike Keating, vice president for CGI-AMS' U.S. west and state and local government group.

"What we can do now that we couldn't do before is bring heft," he said. "Previously, you would have had a typical cast of characters in the Medicaid space, but now the heft we bring with CGI gives us a little bit more permission to be in the space."

CGI, Accenture, IBM and Northrop Grumman typify many of the 14 companies on Washington Technology's 2005 Who's Who list of top integrators in the state and local market. For the list, market research firm Federal Sources Inc. of McLean, Va., ranked systems integrators by their estimated revenue from state and local IT services work.

After several lean years in the state and local market, many top-ranked companies said they are broadening their offerings to follow spending trends in transportation, homeland security, health care and outsourcing.

"We're expecting growing investment by state and local governments in these areas," Accenture's Ross said of his company's wish to branch out into homeland security and transportation in the state and local market.

MOVIN' ON UP

Affiliated Computer Services Inc. of Dallas, EDS Corp. and IBM ? with more than $1 billion each in annual state and local revenue ? held their positions at the top of the list for the fourth straight year. But Accenture is knocking at the door and could break the billion-dollar barrier next year, according to FSI.

Two companies that did hit a new tier on this year's list are Maximus Inc. of Reston, Va., and CGI. Maximus moved into the $500 million to $1 billion category with Accenture, Deloitte Consulting LLP of New York and Unisys Corp. The combining of CGI and AMS pushed the new unit into the $300 million to $500 million category.

Computer Sciences Corp. slipped one notch in the rankings to the $100 million to $300 million category. The company's seven-year, $644 million IT outsourcing contract with San Diego County is set to expire next year, and if the company loses the recompete, it might drop further in the rankings or fall from the list altogether. CSC declined to be interviewed for this story.

Executives with ACS, IBM and Northrop Grumman Information Technology of Herndon, Va., all said they experienced double-digit growth in their state and local businesses last year.

Ray Bjorklund, FSI's senior vice president and chief knowledge officer, said the Who's Who list isn't likely to have newcomers any time soon. "There's a deep chasm between the big and small systems integrators in the state and local market," he said. Many of the smaller integrators in the market have annual revenue of between $20 million and $50 million, and are a long way from the $100 million threshold to make the list.

The state and local market is expected grow to $44.8 billion in 2005 from $42.3 billion in 2004, a modest 5.6 percent growth rate, according to research and consulting firm Gartner Inc. of Stamford, Conn. Gartner predicts that the market will continue growing at that pace to $52.7 billion in 2008.

States are emerging gradually from a prolonged period of budget shortfalls that kept them from investing in system upgrades or business process transformation. By decreasing operational costs and increasing taxes over the past 30 months, states were in a position to correct budget gaps and improve their fiscal situations, said Rishi Sood, research vice president with Gartner.

"As they begin fiscal 2006, most states will be in the green," he said. "The sea of red changing to a sea of green is a continuing event across the nation."

CONSTANT CONCERNS

Unfortunately, ongoing issues associated with the rising costs of health care and homeland security haven't sparked the economic growth across state and local government that everyone was hoping for, Sood said.

Accenture's Ross agreed, noting that three straight years of budget shortfalls have left states concerned about surviving a similar downturn in the future.

"There is a deep feeling that there is going to be another economic downturn in the future, and states are interested in getting their houses in order to be much better prepared to face it," Ross said.

One way to do this is to consolidate data center and IT operations, he said. Accenture won key contracts last year for IT consolidation in Illinois and Oregon, he said. He declined to disclose the value of the projects.

Mark Danis, managing partner and vice president with Unisys' North America Public Sector unit, said his company plans to follow the money trail associated with federally funded initiatives and mandates.

"We're looking where the revenue is going to be and where the larger revenue bases are located," he said.

Companies such as Northrop Grumman IT and Accenture that are looking to expand into the transportation arena will face strong competition from ACS.

Its portfolio of transportation work includes electronic toll collection, photo enforcement, traffic violations processing and collections. And ACS now is eyeing opportunities in seaport congestion and security.

The company was selected recently by the West Coast Marine Terminal Operators to implement a fee collection program for the ports of Los Angeles and Long Beach, said John Brophy, president of ACS' state and local solutions group. The new solution, known as PierPASS, would offer financial incentives for moving cargo during off-peak hours and via rail.

Under the contract, ACS would provide customer service, computer operations, accounting and credit-card collections, Brophy said. At press time, the final terms of the deal were being negotiated.

PierPASS is typical of the kinds of business process outsourcing solutions that ACS develops for state and local customers, Brophy said.

"We offer solutions geared toward narrow areas of problem," he said. "We don't try to take over the whole IT infrastructure, we just target the problem functions."

ACS has more than doubled its state and local revenue in the past several years, Bjorklund said. The company succeeds because it focuses primarily on state and local business and doesn't try to juggle it with federal and commercial work, he said.

But transportation is only one of three areas in which ACS competitor Northrop Grumman IT is looking to make strong headway, said Cheryl Janey, vice president of business development with the company's commercial, state and local solutions. Northrop Grumman IT will take a hard look at toll-related and other transportation opportunities, she said.

"It's the beginning of what is going to be a big opportunity in the years ahead," Janey said.

Senior Writer William Welsh can be reached at wwelsh@postnewsweektech.com.
MORE THAN $1 BILLION

Affiliated Computer Services Inc.

Headquarters: Dallas

Leadership: Jeff Rich, CEO

Head of state and local business: John Brophy, president

2004 revenue: $4.1 billion

State and local revenue: More than $1 billion

Web site: www.acs-inc.com

Employees: 43,000

Lines of business: Information resources management, business process outsourcing, municipal services, transportation systems and services, health and human services.

Major projects: Child support payment processing in 14 states; Medicaid administrative services in 14 states; electronic benefits transfer in 11 states; electronic toll collection in nine states; 55 photo enforcement programs in 49 municipalities; traffic violation processing and collections in 39 jurisdictions; pharmacy benefits management programs in 21 states; unclaimed property clearinghouses in 49 states; and workforce services in 18 states and the District of Columbia.


EDS Corp.

Headquarters: Plano, Texas

Leadership: Michael Jordan, chairman and CEO

Head of state and local business: Barbara Anderson, vice president of state and local business

2004 revenue: $20.6 billion

State and local revenue: More than $1 billion

Web site: www.eds.com

Employees: 132,000

Lines of business: Health and human services, education, fraud detection, justice and public safety, homeland security, enterprisewide solutions, financial solutions and e-government.

Major projects: Medicaid administrative support contracts in 17 states; operation and maintenance of a statewide automated welfare system for California; Medicaid fraud detection for Texas; and outsourcing services and an emergency management command center for Anaheim, Calif.

IBM Corp.

Headquarters: Armonk, N.Y.

Leadership: Samuel Palmisano, chairman, president and CEO

Head of state and local business: Marianne Cooper, vice president of public sector Americas

2004 revenue: $89.1 billion

State and local revenue: More than $1 billion

Web site: www.ibm.com

Employees: 255,000

Lines of business: Tax and revenue, homeland security, human services, justice and public safety, e-government and ERP implementation, IT outsourcing.

Major projects: A wireless network for first responders in Washington; a mobile data system for first responders in southern Mississippi; a child support collection system for the California Department of Child Support Services; data center outsourcing for the New York Metropolitan Transit Authority; a parking management system for Chicago; an enterprise social services system for Louisiana; and IT applications support for Monroe County, N.Y.

$500 MILLION to $1 BILLION

Accenture Ltd.

Headquarters: Hamilton, Bermuda

Leadership: Bill Green, CEO

Head of state and local business: Dave Ross, managing partner, U.S. state and local government client group

2004 revenue: $15.1 billion

State and local revenue: $500 million to $1 billion

Web site: www.accenture.com

Employees: 100,000

Lines of business: Education, e-government, justice and homeland security, human services, revenue and transportation. Services include customer relationship, solutions operations, supply chain, financial management, strategy and business architecture and technical research and innovation.

Major projects: IT rationalization for the Illinois Department of Central Management Services; unemployment insurance benefits modernization for Illinois Department of Economic Security; network and data center consolidation for Oregon; revenue projects in Arizona, Connecticut, Indiana and Nevada; a 311 service center for New York City; child support projects in California, Georgia, Michigan, New Mexico and Tennessee; ERP projects in Connecticut and Washington; and unemployment insurance projects in Colorado and Wyoming.


Deloitte

Headquarters: New York

Leadership: William Parrett, CEO

Head of state and local business: Bob Campbell, vice chairman and public-sector national practice leader

2004 revenue: $16.4 billion

State and local revenue: $500 million to $1 billion

Web site: www.deloitte.com

Employees: 115,000

Lines of business: Homeland security, health and human services, finance and administration, justice and public safety.

Major projects: Electronic disease surveillance for Pennsylvania and Chicago; Medicaid planning in Ohio, Pennsylvania, Texas, and South Carolina; a statewide business process and technology assessment project for Minnesota; program management office support work related to agency consolidations for the Texas Health and Human Services Commission; program support for the Massachusetts Housing Agency; an integrated eligibility system for Texas; and adapting SAP for child support enforcement in Florida.

Maximus Inc.

Headquarters: Reston, Va.

Leadership: Lynn Davenport, CEO

2004 revenue: $603.8 million

State and local revenue: $500 million to $1 billion

Web site: www.maximus.com

Employees: 5,500

Lines of business: Health and human services, enterprise resource planning, e-voting and criminal justice. Services include program management, and IT consulting.

Major projects: Welfare-to-work project for Wisconsin; eligibility determination for California Healthy Families and Access for Infants and Mothers programs; a drug abuse diversion program for California Department of Consumer Affairs; e-voting systems implementation in California and Ohio; child-care administration management information system for Maryland; school-based Medicaid claims processing for Arizona, Kentucky and Michigan; and ERP implementation for Kansas City, Mo.

Unisys Corp.

Headquarters: Blue Bell, Pa.

Leadership: Joseph McGrath, president and CEO

Head of state and local business: Mark Danis, managing partner and vice president, North America Public Sector

2004 revenue: $5.8 billion

State and local revenue: $500 million to $1 billion

Web site: www.unisys.com

Employees: 36,400

Lines of business: Justice and public safety, homeland security, health and human services, tax and revenue, motor vehicle and voter registration, IT outsourcing

Major projects: Outsourced IT services contracts for Chicago,

Minneapolis and New York City Metropolitan Transit Authority; human services projects in Florida, Michigan and New York; Medicaid support in Kentucky, Louisiana, Massachusetts, New Jersey and West Virginia; a motor vehicle registration project in Louisiana; and a voter registration database in Virginia.

$300 MILLION TO $500 MILLION

BearingPoint Inc.

Headquarters: McLean, Va.

Leadership: Rod McGeary, chairman and interim CEO

Head of state and local business: Cathy Pomanti, senior vice president, state and local government and education services

2004 revenue: Unavailable

State and local revenue: $300 million to $500 million

Web site: www.bearingpoint.com

Employees: 15,000

Lines of business: Transportation, justice and public safety, finance, health and human services, and education. Services include business and technology strategy, systems design, architecture, applications implementation, network infrastructure, systems integration and managed services.

Major projects: A retirement administration system for North Carolina; a right-of-way system for Minnesota; an e-government portal for Texas; an e-procurement system for Massachusetts; an unemployment insurance system for Minnesota.

CGI Group Inc.

Headquarters: Montreal

Leadership: Serge Godin, CEO

Head of state and local business: Mike Keating, vice president. U.S. West and State and Local Government

2004 revenue: $2.5 billion

State and local revenue: $300 million to $500 million

Web site: www.cgi.com

Employees: 25,000

Lines of business: Financial management, tax and revenue, e-government, human services and labor, public safety, transportation, e-procurement, business processing and IT outsourcing.

Major projects: More than 190 customers for the company's flagship ERP software product; a strategic sourcing project for California; tax and revenue programs in four states; and statewide automated child welfare systems in Alaska and New Jersey; and contract administration services for local housing authorities in Columbus, Ohio, Oakland, Calif., and Tampa, Fla.

Northrop Grumman Corp.

Headquarters: Los Angeles

Leadership: Ronald Sugar, chairman, president and CEO

Head of state and local business: Cheryl Janey, vice president, business development, Commercial, State and Local Solutions business unit

2004 revenue: $29.8 billion

State and local revenue: $300 million to $500 million

Web site: www.northropgrumman.com

Employees: 125,000

Lines of business: Enterprise infrastructure services, automated identification technology, electronic benefits transfer, IT outsourcing, systems integration, systems engineering and project management.

Major projects: Outsourced IT services for Indianapolis/Marion County, Ind.; public safety work for Chicago, Los Angeles, and Roanoke, Va.; justice systems for Maine and Montana; data center operations for the Texas Department of Information Resources; disease tracking for California, Delaware, Maine and Montana; human services projects in Arkansas, Montana and Texas; electronic benefits programs in Arkansas, Iowa and Maine; and a tax document imaging project in New Jersey.

$100 MILLION to $300 MILLION

Ciber Inc.

Headquarters:Greenwood Village, Colo.

Leadership: Mac Slingerland, president and CEO

Head of state and local business:Ed Burns, president, state and local government practice

2004 revenue: $692 million

State and local revenue: $100 million to $300 million

Web site: www.ciber.com

Employees: 5,700

Lines of business: Finance and administration; health and human services, labor and workforce development, criminal justice, enterprise resource planning, transportation, homeland security, environmental protection.

Major projects: A port security project in Louisiana; ERP implementation and hosting for the Wyoming Department of Transportation; a case management system for Missouri's Department of Economic Development's Division of Workforce Development; network services support for the North Carolina Department of Health and Human Services; Web-based applications for Women, Infants and Children programs in Louisiana and Wisconsin; an Internet-based filing system for the Missouri Department of Labor and Industrial Relations' Division of Employment Security; an application development project for the Illinois Department of Human Services.

Covansys Corp.

Headquarters:Farmington Hills, Mich.

Leadership: Rajendra Vattikuti, president and CEO

Head of state and local business: Arvind Malhotra, senior vice president, public sector

2004 revenue: $378.6 million

State and local revenue: $100 million to $300 million*

Web site: www.covansys.com

Employees: 4,700

Lines of business: Customized and packaged solutions in retirement, health and human services, transportation, criminal justice and voter registration.

Major projects: Voter registration systems for Idaho, Maine, Nevada and Rhode Island; a retirement system for the city of Milwaukee; a women, infants and children information management system for the Chickasaw Nation; an electronic document management system for the Arizona State Retirement System; a child support information system for Ohio; an early development management information system for the Alaska Department of Education and Early Development; a case management system for the Idaho Department of Health and Welfare; a pension management system for the Nebraska Public Employees Retirement Board; and a vehicle registration renewal system for Oregon.

Computer Sciences Corp.

Headquarters: El Segundo, Calif.

Leadership: Van Honeycutt, chairman and CEO

2004 revenue: $14.7 billion

State and local revenue: $100 million to $300 million

Web site: www.csc.com

Employees: 90,000

Lines of business: IT applications outsourcing and business process outsourcing.

Major projects: Manages, maintains and operates San Diego County's computer and telephone systems, including refreshing technology and developing online services; and a Medicaid system for New York.

Science Applications

Headquarters: San Diego

Leadership: Kenneth Dahlberg, chairman, president and CEO

Head of state and local business: James Morentz, vice president for homeland security technology

2004 revenue: $6.7 billion

State and local revenue: $100 million to $300 million

Web site: www.saic.com

Employees: 42,700

Lines of business: IT services, criminal justice, health care, data mining and data warehousing, software development, systems integration and program management.

Major projects: An interactive coordinated responder information system for Alachua County, Fla.; interactive livestock emergency response tool for Illinois; a subcontract to CSC for the San Diego County IT outsourcing contract. The soaring costs of Medicaid are forcing many states that usually handle claims processing themselves to outsource the work, according to industry officials.

Nine states, including Nebraska, North Dakota, Ohio and Oregon, are considering plans to turn over Medicaid claims processing to the private sector, they said.

"For the first time, these states are going to the private sector to get help managing the escalating costs associated with Medicaid programs," said Barbara Anderson, vice president of state and local government business with EDS Corp.

Spending for state and local government health care IT will increase by 50 percent over the next five years, from $6 billion in 2005 to more than $9 billion in 2009, according to Input Inc., a Reston, Va., market research firm.

Medicaid management information systems contracts make up a big chunk of state health care IT spending and are among the most coveted deals. Contracts can range from $50 million to $400 million.

The work involves implementing systems that comply with federal regulations and providing fiscal services, such as eligibility determination, claims processing and provider payment.

As many as 16 states may look for new Medicaid systems or refresh existing systems in 2005, said Harvey Braswell, group president for state health care solutions for Affiliated Computer Services Inc. of Dallas.

EDS is the leader in health care with 17 active Medicaid administrative services contracts, but ACS is close on its heels with 14 contracts. Unisys Corp. has Medicaid contracts in five states.

EDS successfully defended four of five contracts that were up for renewal last year, Anderson said. The one renewal EDS didn't win was in North Carolina, where ACS won the $171 million contract for a Medicaid replacement system in April 2004.

EDS subsequently protested the award on the grounds that ACS did not meet several of the state's requirements. The North Carolina Department of Heath and Human Services defended the award, but an administrative law judge ruled in January that the award to ACS should be canceled and the contract re-bid. The final decision rests in the hands of George Bakolia, North Carolina's chief information officer, who must decide no later than next month whether to overturn the award.

Newcomers can make successful forays into this market because even the health care giants can't bid on all of the deals.

"We're being more selective about what we're bidding on, because it costs anywhere from $1 million to $3 million to bid on a Medicaid contract," ACS' Braswell said. "If you look at all 16 opportunities, companies can't bid on all of those. At least I know we can't." By purchasing American Management Systems Inc. last year, CGI Group Inc. has positioned itself to challenge the dominant players for a slice of the business process and IT outsourcing pie.

The new CGI-AMS unit created by the acquisition inherited a significant block of business process outsourcing contracts with local housing authorities from CGI. These will serve as a foundation on which to build, said Mike Keating, vice president of CGI-AMS' U.S. West and state and local government group.

Last year, Montreal-based CGI won contracts totaling $85 million to handle program start-up, contract administration and payment services through partnerships with housing authorities in Tampa, Fla., Columbus, Ohio, and Oakland, Calif.

Business process outsourcing is the contracting out of back-office functions or transaction-oriented functions, such as accounts receivable, billing, claims processing and transaction processing.

Keating said the company didn't lose any momentum as a result of the acquisition that brought Fairfax, Va.-based AMS to CGI.

"Most people expect some distraction following an acquisition, but I believe we did well in the state and local market last year and maintained our focus," he said.

State and local spending on IT outsourcing is expected to grow at a rate of 12.4 percent annually from $11.3 billion in 2005 to $17.7 billion in 2009, according to market research firm Input Inc. of Reston, Va.

CGI will compete for the housing authority work against longtime provider Affiliated Computer Services Inc. of Dallas. John Brophy, president of ACS state and local government solutions, said the company plans to target housing authorities this year to expand its already formidable business process outsourcing pipeline.

ACS handles outsourcing for human services and transportation. The company does child support payment processing in 14 states, electronic benefits transfer in 11 states, electronic toll collection in nine states and traffic violation processing and collections in 39 jurisdictions, Brophy said.

CGI-AMS also plans to compete for large-scale, local government outsourcing contracts with other systems integrators such as IBM Corp. and Northrop Grumman IT of McLean, Va.

Officials at CGI-AMS and Northrop Grumman IT have said they plan to pursue a new IT outsourcing contract that San Diego County will award later this year. The county's $644 million contract for telecommunications and IT services, currently held by Computer Sciences Corp., will expire next year, and San Diego last month asked contractors to begin submitting proposals for a new contract.

CSC has not said whether it will try to keep the deal, which almost fell apart early on when it failed to meet performance-based requirements. Request for proposals will be released May 1, and the contract will be awarded by the end of the year, county officials said.

CGI-AMS, IBM and Northrop Grumman are finalists for a statewide IT outsourcing and enterprise resource processing re-engineering contract in Virginia that would be awarded under the state's new Public-Private Education and Infrastructure Act.

IBM and Northrop Grumman were selected in November as finalists for the IT infrastructure component of the project, while CGI-AMS and IBM were selected as finalists for re-engineering statewide ERP components.

Virginia officials have not said how much they intend to spend on the outsourcing project, but analysts estimate it could be worth $2 billion to $4 billion over 10 years. *

"Our acquisition pipeline is quite robust." ? John Brophy, Affiliated Computer Services Inc.

Affiliated Computer Services Inc. plans to continue its remarkable growth in the state and local market with more acquisitions this year, said John Brophy, group president of the Dallas company's state and local solutions unit. ACS is seeking to boost its strength in health and human services, public safety and transportation through new acquisitions, he said. Although many of the company's acquisitions are small, ACS is planning some big deals this year as well, he said.

"Our acquisition pipeline is quite robust," Brophy said.

In the past 14 months, ACS has expanded significantly its capabilities through acquisitions. The largest of these was the acquisition of Patient Accounting Services Center LLC of Kent, Wash., which provides financial services for health care, for $94 million last January.

The company also picked up Heritage Information Systems of Richmond, Va., a provider of pharmacy cost containment solutions, for $24 million in July, and Wagers and Associates of Boulder, Colo., a maker of unclaimed property software, for an undisclosed sum in August.

Earlier this year, ACS acquired Visionary Systems Ltd. of Urbandale, Iowa, which offers emergency medical services software, for $16 million.

ACS, together with Los Angeles-based Northrop Grumman Corp. and Reston, Va.-based Maximus Inc., are the companies to watch this year for acquisition activity in the state and local market, according to analysts and industry observers.

ACS cemented its reputation as a leading acquirer in the state and local market with the purchase of Washington-based Lockheed Martin IMS for $825 million four years ago. The purchase helped catapult ACS into the top tier of Washington's Technology's Who's Who list of top state and local integrators.

Both ACS and Maximus concentrate primarily on the state and local market, whereas many of the other companies on the list have substantial federal practices.

ACS "has been one of the few active buyers in the state and local market," said Bob Kipps, a senior vice president with McLean, Va., investment banking firm Houlihan, Lokey, Howard and Zukin.

This is partly because companies with a heavy presence in the federal market, such as Accenture Ltd. and Unisys Corp., have made a conscious decision not to pursue acquisitions as part of their state and local growth strategies, he said

Maximus hasn't made any significant acquisitions lately, but the company is in a financial position that lets it be more aggressive now, he said.

Although Northrop Grumman's acquisition three years ago of TRW Inc. of Cleveland was done primarily to enhance its defense and electronics capabilities in the federal sector, Kipps said, it paid off handsomely for its state and local business.

"That wasn't [a case of] the tail wagging the dog," Kipps said. "They didn't buy TRW because of its state and local IT work. It was more of a coincidence than a driver of the deal."

Cheryl Janey, vice president of business development with Northrop Grumman Information Technology's commercial, state and local business unit, said the company wants to make acquisitions part of its growth strategy. "We definitely want to eat up the food chain," she said. "There's no reason to think that the company won't do acquisitions."

Although Northrop Grumman did not make any acquisitions to enhance its state and local offerings last year, its pending purchase of Integic Corp. of Chantilly, Va., will add some capabilities that will carry over to the state and local market in the areas of health and human services and business process outsourcing.

There aren't as many acquisitions of medium-sized companies in the state and local market because there are fewer players overall and because the market is highly fragmented, with some companies focusing only on a region or a handful of states, Kipps said.

Companies with revenue of $10 million to $30 million are common in the state and local market, but there aren't many companies in the $25 million to $100 million range, he said. Homeland security is a major focus of many companies on Washington Technology's 2005 Who's Who list, especially those big in the federal arena. Accenture Ltd., EDS Corp., IBM Corp., Northrop Grumman Corp. and Unisys Corp. continue to invest heavily in solutions aimed primarily at local governments and first responders. Several have made inroads at providing systems and solutions related to identity management, information sharing and interoperable communications.

"We see that as an area with a lot of potential for growth in 2005," said Barbara Anderson, vice president of EDS' state and local business.

EDS, IBM and Northrop Grumman are concentrating on offering the infrastructure to support wireless interoperable communications among first responders.

EDS unveiled a new technology platform last year to support first responders in Anaheim, Calif. The company hopes to transfer the platform to other jurisdictions.

The first phase of the project, which was funded by a $10 million federal grant, went live in July and consists of a portal that lets city officials manage emergency response assets via a virtual command center. The second phase of the project would provide similar asset-tracking capabilities to first responders in the field.

Cheryl Janey, vice president of business development with Northrop Grumman IT's Commercial, State and Local Solutions unit, said the company in 2005 will continue to bring its experience assisting federal agencies with secure communications to bear in the state and local market.

Among its offerings, Northrop Grumman IT designs and builds public safety facilities and provides wireless, interoperable communications for first responders, she said.

The company in December won a $26 million contract with Roanoke County, Va., to design and build a new public safety facility and upgrade key public safety systems. The company will install a new enhanced 911 telephone system, a new computer-aided dispatch system and a facilitywide local area network and Internet protocol-based administrative phone system.

IBM also provides integration services for wireless infrastructure to support interoperable communications, said Marianne Cooper, vice president of IBM's Public Sector Americas.

The company in June won a pilot project to deploy a mobile data infrastructure for first responders in three Mississippi counties that border the Gulf of Mexico. The Mississippi Automated System Project was funded by a $14 million federal grant.

IBM also won about a dozen contracts with local governments last year to provide "in-car video" that lets police on patrol record their activities for use as evidence. Among the jurisdictions using the solution are Seattle, St. Louis, Santa Barbara, Calif., Yakima, Wash., and Tyler, Texas.

Unisys, another federal homeland security market player, recently bolstered its state and local practice by hiring Gerry Wethington to head its homeland security and justice and public safety programs. Wethington was a two-term president of the National Association of State Chief Information Officers and former Missouri CIO.

Unisys intends to make additional high-profile hires and pump more dollars into research and investment in homeland security, said Holli Ploog, general managing partner of Unisys' North America Public Sector unit. The company is tracking federally funded homeland security opportunities in Minnesota, New York and South Carolina, Ploog said.

Accenture also wants to bring its federal expertise to the state and local market, said Dave Ross, managing partner of the company's U.S. state and local government client group. The company is the prime contractor on the Homeland Security Department's $10 billion U.S. Visit project to track foreign visitors as they enter and leave the United States.

Local governments, for example, are interested in tracking foreign visitors while they are inside the country, he said.

"The fact that we are the integrator for U.S. Visit [helps us] understand how entry and exit information at the federal level might be integrated with state and local jurisdiction information," Ross said.

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