A natural move beyond the network

Verizon Business plots careful strategy to become a prime federal contractor

Headquarters: Basking Ridge, N.J.

2007 Revenue: $21.2 billion

Top 100 rank: 18

Employees: 32,000

Web Site: http://www.verizonbusiness.com

LEADERSHIP: John Killian, president.
D. Blair Crump, senior vice president
of premier and international
sales. Stephen Young, senior vice president
of corporate and government
markets. Nancy Gofus, senior vice president
and chief marketing officer. Fred Briggs, executive vice president
of network operations and
technology. Terri Dean, senior vice president
of communications.

BUSINESS LINES: Telecommunications networks.
Network integration and
engineering. Information technology services. Professional security services. IP communications. Contact-center solutions.

MAJOR CUSTOMERS: Defense Department. Homeland Security Department.

The spark of inspiration that lit up executives at
Verizon Business occurred about 18 months ago,
company officials said. That's
when they realized their
commercial-sector communications solutions
were ripe for adoption by a federal marketplace
seeking solutions on a constrained budget.

"I guess you could say it was our 'aha!'
moment," said Paul Bates, vice president of
global professional services and enterprise
solutions at Verizon Business, a unit of Verizon
Communications Inc. "We had a lot of very
sophisticated tools on the commercial side," he
said. "We just thought ... it was a natural evolution
to take them into the government space."

Not that the giant telecommunications company
was faring poorly. Verizon Business reported
$21.2 billion in revenue in 2007 and was
"growing at about 18 percent a year in the
professional-services world," Bates said. Verizon
Business' federal sector had $1.3 billion in prime
government contracting revenue in 2007. The
company ranks No. 18 on Washington
Technology's Top 100.

Verizon Business recently won a major portion
of the Homeland Security Department's
$970 million OneNet award under the General
Services Administration's Networx contract
vehicle. As the prime contractor, Bates said,
Verizon will earn $678 million by building operating
centers for network and security operations
and a video, voice and data network known
as a multiprotocol layer system.

Bates said he is looking forward to the 18 to
20 task-order opportunities that are expected to
be awarded soon under Networx. Agencies
know they have until the end of the year to transition
to Networx, he added, and he predicted a
flurry of activity before then. In addition, the
company has gained nearly $55 million in task
orders in six months from the Army's
Infrastructure Modernization contract.

With an eye toward the lucrative Networx
contract, Verizon built its Government
Network Operations and Security Center in
Ashburn, Va., which includes network monitoring,
emergency command facilities and a
briefing area. Verizon also has established a
Very High Speed Backbone Network Service
to help the government switch over to next-generation
IPv6.

MARKET APPROACH

Coincidentally, Verizon Business is increasing
its professional-services offerings with the
addition of 2,700 specially trained consultants
in five key practice areas: security services, information technology services, network integration
and engineering, IP communications,
and contact center services.

Government agencies are learning that they
have the same needs and concerns as many
large commercial customers, Bates said. They
are also realizing they can go outside the normal
world of large government contractors to
buy communications solutions. Agencies are
now letting Verizon Business use the capabilities
it has already developed for the commercial
side in the federal space, he said.

Bates said Verizon Business' methodology is
to tell government clients, "Give us what you
have, we'll take it over as is. We'll give you a
transformation plan, and then we'll deliver what
we would call a new and enhanced version." It's
a sales pitch that is not falling on deaf ears, he
added. "What we're showing the federal space is
that we're not just a network provider."

The marketing plan also aims to correct the
misconception some government agencies have
that telecommunications providers don't have
the capabilities needed to win prime government
contracts. The company is pushing some
specialized services, including IP convergence,
service-oriented architecture, denial of service
and security operations centers, Bates said.

In increasing instances, agencies that once
went to the large systems integrators for such
services are now "very much looking at us to
provide them," he added.

Verizon Business' stand-alone network operations
centers ? which Bates called NOCs in a
box ? are an example of a commercial product
that can be reconfigured to meet government
needs, he said. Also, its commercial optical networks
meet the government's growing desire to
purchase environmentally friendly products
that also reduce costs. Fiber networks significantly
lower operating and maintenance costs,
he said, including savings on electricity of as
much as 70 percent.

Verizon has also been working on expanding
the federal definition of
past performance by including
commercial past performance
as a determining
factor on contract awards,
Bates said.

RESPONDING TO DEMAND

The company's efforts to
expand beyond the commercial
sector have not gone
unnoticed. Research firm
Gartner Inc. recently named
Verizon Business to its top-rated
group of professional
network service providers.

Since its creation in
January 2006 with the acquisition
of MCI, Verizon
Business has taken advantage
of inherited expertise, said
Alex Winogradoff, research
vice president at Gartner.

"MCI had significant business
with the federal government
in many, many departments."
He said it makes sense for
Verizon Business to seek
more federal work because
"once they get a contract, it's
a steady business."

Winogradoff said earlier
government telecom contracts
basically called for providing
bandwidth, point-topoint
circuits. Federal agencies
went to third parties,
many of them systems integrators
such as EDS Corp., Computer Sciences
Corp. and IBM Corp., for their professional
services needs.

Now, with Networx, "this is the first time the
telcos are able to participate in those kinds of
contracts as well," he said. So it makes good
business sense to offer professional services.

To meets its expected growth in the federal
marketplace, Verizon Business is expanding its
cadre of 400 federal program managers, 65
percent of whom are licensed
as program management
professionals. All of them will
work directly with government
customers, said Ed
Hill, director of operations at
Verizon Business' Federal
Network Systems.

Winogradoff said it makes
good economic and management
sense to have a pool of
program management professionals
who can work with
government and commercial
clients. "At the end of the day,
it is the same knowledge
base," he said, even if agencies
have different requirements.

For example, security concerns
are a critical element in
most government projects
and vary from agency to
agency, Hill said. "When we
build a network now, there
are as many as six to seven
layers of security ? or barriers
? that are established."

So Verizon's managers have
appropriate security clearances
to meet customer
requirements.

Verizon's security offerings
might be its best advertisement
as a prime contractor.

"As security has become more
important and the professional
services that we can
deliver become more important,"
Bates said, "the government as well as
commercial folks are seeing us as really a prime
contractor, not as a sub."

David Hubler (dhubler@1105govinfo.com) is associate
editor at Washington Technology.

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