How to succeed in government business by really trying hard
TeleCommunication Systems banks on satellites and wireless to post impressive revenue gains
- By David Hubler
- Apr 14, 2010
TeleCommunication Systems Inc., founded in 1987 as a small wireless systems provider, could be a role model for how to succeed in government business by really trying.
The company’s 23-year history includes a stint in the 8(a) certified small-business program, an initial public offering, conducting triage on a moribund government business, making several acquisitions and, last year, reaching $300 million in annual revenue.
TCS has more than 1,000 employees, and company executives say they expect TCS' combined commercial and government revenues to be between $430 million and $450 million this year, which would mean a 50 percent growth rate.
“We are a growth company. We’re not stopping,” said Drew Morin, TCS’ senior vice president and chief technology officer. As the third employee hired by company founder Maurice Tose, he knows TCS’ history first hand.
The Annapolis, Md., company’s first major contract came in 1989, the same year that TCS entered the 8(a) program. The $1.75 million award called for designing and building a local-area network for the Special Operations Command's headquarters at McDill Air Force Base, Fla.
That award led to further work from military special operations clients.
In 1996, the company founded its commercial side when it built a text messaging platform in partnership with what then was AT&T Network Solutions, now Alcatel Lucent.
“What that enabled us to do was get into the commercial business, and we had the Lucent seal of approval — kind of like the Good Housekeeping Seal of Approval — and thus began our building up of the commercial business really around the software side,” Morin said.
The company graduated from the 8(a) program in 1998. Along the way, TCS had built a profitable commercial business and software development group. But Morin and Michael Bristol, senior vice president of the government solutions group, agree that, at the same time, the government sector’s business slipped substantially.
The group’s performance was so lackluster that when the company went public in 2000, stakeholders urged TCS to drop the government sector altogether, said Bristol, who joined TCS’ commercial sector in 2004.
He was soon assigned to revive the federal business.
“We had to start going after major contracts instead of trying to find the sergeants who had $200,000 to spend,” Bristol said. “And we had to partner with major integrators because we still didn’t have much weight or momentum.”
But the Y2K computer-crash frenzy, the 2001 terror attacks and the war in Iraq brought TCS new government contracts, and the sector saw annual revenues increase from $17 million to $30 million without any major investments in capital expenditures, new sales personnel, or research and development investments, he said.
Government contracts continue to increase, Bristol added, and last year, they accounted for $170 million in company revenue, putting the sector on an equal footing with the commercial sector.
TCS is one of six prime contractors on the Army’s five-year, $5 billion indefinite-delivery, indefinite-quantity World-Wide Satellite Systems contract.
“That was a game changer for us,” Morin said, because it showed that TCS could win large awards and successfully handle them.
The WWSS contract also boosted the company’s competence and reputation in the satellite communications arena, he added.
TeleCommunication Systems has won 19 competed request for task-order execution plans, competing against the likes of General Dynamics and Boeing. One of those wins includes a WWSS task order worth $240 million, Bristol said.
“We’ve won 65 percent, the other five shared the other 35 percent," he said. "And we still can qualify as a small business on certain [North American Industry Classification System] codes, having fewer than 1,500 employees.”
But both executives agree that TCS can’t afford to rest on its laurels.
“The reality is that the five-year contract expires in a year and a half, and we were so busy going from $30 million to $170 million in the blink of an eye that we didn’t have time to say, ‘Wait, we’ve got to now go win other major contracts.’ And I just started that engine going,” Bristol said.
He's created a separate sales team to pursue and capture some of those big awards. The new team includes full-time sales employees, several retired military officers and part-time specialty consultants.
Bristol said the team is pursuing 30 deals, all of which will be awarded within the next three years. TCS is hoping to be the prime contractor on about 65 percent of them, he said.
“All in all, we now have a pipeline of [potential] major deals in excess of $40 billion,” Bristol said. “And we will win some of them.”
Bristol also has established revenue targets. “I told the management team a little bit more than a year ago we’d be at $500 million in five years,” he said.
In addition to actively targeting prime government contracts, TCS’ two-pronged business plan for growth also includes acquiring niche companies.
In a pair of cash deals in November 2009, TCS acquired Sidereal Solutions, a satellite communications engineering company in Duluth, Ga., and Solvern Innovations Inc., a Baltimore cybersecurity and cyber warfare solutions provider whose main client is the National Security Agency.
“That is where we see a growing opportunity,” Morin said. “We see [cybersecurity] as a growth area in the future for us.”
Also, the federally mandated Base Relocation and Consolidation effort should offer a number of lucrative contract opportunities, Bristol said.
Army communications installations are moving from New Jersey to Aberdeen Proving Ground, north of Baltimore, and Fort Belvoir, in Fairfax County, Va. — both of which are within TCS’ comfortable commuting zone.
In addition, the BRAC co-location of the Defense Information Systems Agency at NSA headquarters at Fort Meade, Md., is expected to be completed within the next 18 months, and that could prove to be a long-term windfall for the company.
“Those are arguably the two biggest communications entities in the world, and [both will be] 30 minutes from our doorstep,” Morin said. “It’s going to be very good for us.”