No. 17: IBM Corp. steps up as a subcontractor

IBM Corp.

Prime IT contracting revenue: $810.3 million

Location: Armonk, N.Y.

Leader: Samuel Palmisano, chairman and CEO

Employees: 329,000

URL: www.ibm.com

2005 revenue: $91.1 billion

2005 net earnings: $7.9 billion

2004 revenue: $96.3 billion

2004 net earnings: $7.5 billion

Anne Altman, vice president and managing director of IBM's U.S. Federal division

Rick Steele

BM Corp.'s federal unit is taking on a different position in the federal marketplace: subcontractor.

In the last year, the Armonk, N.Y., company has increased its subcontracting revenue by 26 percent by winning work from companies such as Science Applications International Corp. and SRA International Inc.

Company executives said the increased subcontracting business has been a matter of closely identifying where the company might play a more significant role in federal government work.

"We chose wisely the opportunities that we pursued, and we aligned ourselves in a way that's growing our business and strengthening our practice areas here," said Anne Altman, vice president and managing director of IBM's U.S. Federal division.

In 2005, the company's subcontracting wins included the Federal Aviation Administration Enterprise Service Center contract, which SRA won in June. The $97 million deal requires SRA to create a strategic plan for the center, which was designated as a federal cross-agency service provider for financial management services.

SRA and its team, which includes IBM, Spectrum Solutions Group, a company that SRA acquired in November 2005, and Vigotsky & Associates LLC, will develop a framework for executing projects and implement enterprise resource planning solutions using Oracle Corp. software.

SAIC also hired IBM and several other companies to work on the Unified NASA IT Services contract. The companies are providing IT management service functions on the $826.1 million contract.

IBM's prime contracting dollars have dipped in the last year, dropping the company three slots on this year's Top 100 to No. 17, with $810 million in federal contracting dollars. Last year, IBM celebrated hitting a little more than $1 billion in prime contracting revenue.

The federal unit has had to adjust to how the government is spending its money these days, Altman said. The federal government faces budget constraints, the war in Iraq and the challenge brought on by last year's natural disasters, of which "put pressures on civilian agencies and the intelligence and defense community," she said. "Other programs coming down the pike may have to be put on the back burner."

IBM had some significant wins in 2005. In the middle of the year, the company announced a Navy win worth $100 million for services to help streamline financial systems. The four-year contract went to IBM's Business Consulting Services unit in Fairfax, Va.

Altman said she's making decisions that take into consideration that a new administration and new budget priorities are two years away. Federal contractors also are contending with a prediction of another destructive hurricane season, she said.

"My challenge is to make sure we track that, provide the greatest value and don't waste a lot of time on programs that may not materialize," Altman said.

At this time next year, Altman said she hopes to be talking about winning the Air Force Expeditionary Combat Support System contract, which will replace more than 700 Air Force retail and wholesale logistics legacy systems with a commercial Enterprise Resource Planning package.

The company also expects to win the Marine Corps' Global Combat Support System contract, which entails installing software to modernize logistics processes.

"We literally have billions of dollars of opportunities that we're looking at right now," Altman said.

Additional 2006 Top 100 Profiles
  • No. 1: 12 times the fun for Lockheed

  • No. 2: Northrop takes aim on health IT

  • No. 3: SAIC prepares for public debut

  • No. 4: Revving the acquisition engine

  • No. 5: CSC holds a lure for a buyer

  • No. 6: Raytheon works the system

  • No. 7: L-3 cuts bigger slice of govt pie

  • No. 8: For EDS, steady as she goes

  • No. 9: Booz Allen adapts to stay on top

  • No. 10: Dell solutions get superpowered

  • No. 11: BAE keeps acquisition fires burning

  • No. 12: Despite sale, Anteon's vision lives on

  • No. 13: Intelligence work fuels CACI's growth

  • No. 14: Verizon-MCI combination packs a punch

  • No. 15: Restructured IDS lets Boeing help clients

  • No. 16: ITT Industries aims for the sweet spot

  • No. 17: IBM Corp. steps up as a subcontractor

  • No. 18: Sprint Nextel goes for convergence

  • No. 19: For SRA, the profit is in its people

  • No. 20: It's always mission possible for Unisys

  • Overview: The Billion-Dollar Club

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