Aggressive moves

Health, logistics, IP management among CSC targets

Computer Sciences Corp.

Headquarters: El Segundo, Calif.

Founded: 1959

President and CEO: Michael Laphen

Chairman: Van Honeycutt

Employees: 87,000 employees in 92 countries

Fiscal 2007 revenue: $14.9 billion

2007 public-sector revenue: $5.4 billion

Source: Computer Sciences Corp.

If Computer Sciences Corp.'s new companywide
strategic plan is successful, CSC
will see double-digit growth rates in the next
five years, including a targeted 10 percent
annual increase in its government business.
It's a horizontal strategy that CSC executives
and analysts see as pivotal for the company's
future in the commercial and public sectors.

Project Accelerate, initiated several
months ago without public fanfare, was
spurred by Mike Laphen, CSC's chairman,
president and chief executive officer.
Commercial clients account for 60 percent
of CSC's business, said Mike Gaffney, president
of business development for the North
American public sector. "We have the ability
to pull through a lot of the best thinking and
show it off to clients and say, 'This is not just
your old, comfortable CSC contract.' "

"What they're trying to do," said Bob
Welch, group vice president and general
manager at research firm IDC Global
Services, "is build as consistent a business on
the commercial side as
they have in the federal
sector." He called
CSC's plan an absolute
necessity.

Goal-oriented

"The presence of
[CSC's] broad footprint,
its portfolio of contracts, has allowed
us to shift resources pretty effectively to go to
where there is money when money starts to
become scarcer in other places," said James
Sheaffer, president of the company's North
American Public Sector. "We have done a
pretty good job of being able to react to a
market where budgets on the civilian side
have been tight."

Nevertheless, he added, it's not easy for a
large organization with some $5.4 billion in
federal revenue to grow 10 percent annually.
"You have to effectively create another
$500 million company every year in order to
do that," he said.

The immediate goal is to expand CSC's
commercial business with significant opportunities
for growth in the federal sector as
well, Sheaffer said. The company has almost
70 indefinite-delivery, indefinite-quantity
contracts, many of them with civilian agencies.

"We view some of that business as our
core business," he said.

"There is no agency of note in the federal
government that we haven't done business
with for a long time and aren't doing business
with today," he said, adding that the first
goal of Project Accelerate is to retain those
contracts and win others as opportunities
arise. Defense Department customers make
up about 67 percent of CSC's government
revenue, and civilian agencies account for
about 33 percent.

Focused investment

CSC recognizes that business with some
government agencies will grow faster and
provide a greater return than with others,
Sheaffer said. So the second goal is to focus
investments and talent on those federal
agencies that can generate the highest
return. "We call that element of our strategy
our high-growth market segment strategy."

"The marketplace is changing," said Kurt
Potter, research director at Gartner Inc. "In
the past, a lot of the large providers ? like
CSC ? for the most part would bid on outsourcing
contracts and be successful. Now
they have to change the way they do things,"
he said. There are fewer large federal contracts,
fewer partnering opportunities and
increased international competition, especially
from India.

Project Accelerate targets six specific government
markets for CSC's growth: health
services, logistics, training and simulation,
command and control, identity management
credentialing, and infrastructure services.
Sheaffer said they represented about 30 percent
of the company's government business
last year.

"We think budgetary trends, demographic
trends and other drivers in the market all
point to those as being areas of significant
growth opportunity," he said. "We believe
they will grow faster than other aspects of
CSC's government business."

"The benefit of this Project Accelerate is
that they're focusing. And where you focus is
where you are going to have growth," Potter
said. "If you try to focus on everything, then
nothing grows, so this is the beauty of it all.
[If] they focus on their strengths, [then]
everything is going to be wonderful for them
going down the road."

Branching out

But CSC also plans to expand into sectors
in which it traditionally has not been a major
player, including Canada and U.S. state and
local government markets. As a first step, the
company's Canadian business unit has been
placed under Sheaffer's aegis in the North
American Public Sector group.

CSC does about $450 million in government
and commercial health services domestically,
Sheaffer said. For example, CSC manages
the New York state Medicare-Medicaid
program, which accounts for 8 percent of
Medicare/Medicaid processing in the United
States, second only to California.

"We're taking that capability and exporting
it into other states where we feel we can
deliver that [system] effectively," he said,
adding that CSC is pursuing some large contracts
with the Centers for Medicare and Medicaid and the North Carolina
Medicare/Medicaid program. "Then we're
going to look at some of the other large [state
contracts] coming up."

CSC's main competition for state and local
health care contracts will come from EDS
Corp. and Affiliated Computer Services Inc.,
Sheaffer said.

To further strengthen its offerings in the
six target markets, CSC also plans to make a
number of acquisitions. "It's part of a broader
corporatewide acquisition strategy that
includes the Covansys Corp. acquisition and
the upcoming acquisition of First Consulting
Group in health care," Sheaffer said.

Within the federal sector, CSC will take
advantage of its best innovative thinking and
apply the appropriate concepts to its civilian
and its military customers, Gaffney said.
As an example, he cited the company's role
in accelerating the training of Army helicopter
pilots using sophisticated simulators. "It's
almost like thinking about a supply chain,"
Gaffney said, by counting the number of
trainees in the system, assessing how many
trained pilots are needed, and determining
how quickly they can complete that training
and be ready to fly.

That same simulation technology and supply
chain concept can be applied to training
air traffic controllers for the Federal Aviation
Administration. "We started looking at what
the techniques [are] that we can bring from
our capabilities that we've honed in the military
to the FAA," Gaffney said. By improving
the flow of trainees through the system, FAA
will turn out more air traffic controllers faster.
Identification management credentialing
is another growth target for the company.

"We think it is going to be significant, especially
in homeland security, but it actually
extends beyond [the Homeland Security
Department] into places like the
Department of State," Gaffney said.

Measuring success

It's too soon to know how well the new corporatewide
plan is working. Sheaffer said it
will take a year's worth of financial data to
begin to show results. That won't come until
the middle of 2008.

"Any improvement in their revenue growth
rate would be a sign of success," Potter said,
and he added that another indication would
be CSC's market share against its main rivals,
IBM Corp. and EDS. "They have to maintain
or increase their market share by a half percent
or two to show success," he said.

But even without firm numbers, "we're
pretty excited about what we think we've
embarked on," Sheaffer said, "and we're comfortable
that we're seeing the kinds of success
we wanted to see early on. But we still have a
lot of work to do."

Associate Editor David Hubler can be reached at
dhubler@1105govinfo.com.

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