Top 100 companies face an ever-changing market

Success depends on following priorities and helping customers

Don’t let the plethora of familiar names on the 2010 Top 100 lull you into thinking the federal contracting market is stagnant. If anything, the opposite is true.

Some of the biggest names, notably BAE Systems Inc., General Dynamics Corp. and Science Applications International Corp. are in the middle of major transitions as new leaders take the helm. Northrop Grumman Corp. is on the verge of a cross-country move of its corporate headquarters.

Meanwhile, all the companies are facing opportunities and challenges that are affecting the way they do businesses and how they serve their customers.

Tight budgets, new procurement policies, evolving customer demands and a still-shaky economy have companies up and down in the Top 100 making adjustments, whether they are acquisitions, restructurings or new offerings for customers.

The list also showcases the range of companies that sell high-tech products and services to the government market, from traditional systems integrators and information technology services providers to telecommunications and research and development companies.

The Top 100, created through an analysis of government procurement data by market research firm Eagle Eye Publishers, captured a total of $129.9 billion in prime contracts during fiscal 2009, compared with $119.6 billion last year.

The biggest challenge most often cited by executives with Top 100 companies is the federal budget and the deficit. All are expecting Congress and the administration to make tough decisions on what gets funded and what doesn’t.

The tight budget is driving two types of reactions from companies as they adjust strategies to make their businesses grow.

For some, it is paramount to align company capabilities and lines of business with the government’s priorities.

“You really need clarity of what you are trying to accomplish,” said Mac Curtis, chief executive officer of Vangent Inc., No. 57 on the Top 100 list.

For Vangent, that means focusing on education and health care information systems and constantly asking, “Is this what our customer needs?” Curtis said.

Many companies on the Top 100 are focusing on opportunities in cybersecurity, health care, intelligence, energy, education, and command-and-control systems, executives said.

“We have been shifting our investments and approach in the past 12 to 18 months in response to new government priorities and long-term drivers,” said Jim Sheaffer, president of public sector at Computer Sciences Corp., No. 10.

Cybersecurity, data center consolidation, health IT, training and simulation are among the priorities CSC is pursuing, he said.

“It always goes back to clients and requirements,” said Paul Cofoni, CEO of CACI International Inc., No 16 on the Top 100.

Although the wars in Iraq and Afghanistan have fueled growth in this area, the opportunities for intelligence and command-and-control systems are not expected to dry up as those conflicts wind down. “This is a generational conflict we are in,” he said.

Cofoni's sentiment is echoed by many executives, particularly those from companies heavy in the defense and intelligence business or who want to be.

Wanting to crack the defense and intelligence market was a major driver for CGI Group’s desire to acquire Stanley Inc. for $1 billion. CGI, No. 91, had little to no business in that sector, while Stanley, No. 44, gets 77 percent of its revenue from defense and intelligence customers.

Although companies are moving toward the growing niches in the market, they also see opportunities in helping agencies get more done with what they have.

For CDW Government Inc., that means pursuing opportunities that involve virtualization and data center consolidation, said Andy Lausch, vice president of federal sales at CDW-G, No. 52 on the Top 100.

“Cost savings is very important to our customers,” he said.

CDW has been evolving from its roots as a product seller to more of a solutions provider, Lausch said. Customers want more than merely technology, and as technology has become more of a commodity, it is important for the company’s profitability to be able to package technology with services and other offerings, he said.

Tom Anderson, president of the information systems group at Wyle Laboratories Inc., No. 45, said the changes in the marketplace are leading to fewer opportunities for traditional systems integration work. However, opportunities that involve cloud computing will increase.

“Cloud computing really is just part of the evolution of computing,” he said, comparing it with time-share computing in the 1970s and 1980s. “The cloud is something everyone will be using on some level.”

But despite the bright spots in the market, many in industry worry about the long-term effects of tight budgets and continuing problems with the government’s ability to manage procurements.

“The government suffers from a lack of depth on the contracting side,” said Stanton Sloane, CEO of SRA International, No. 30 on the Top 100. “There is a real depletion of experienced personnel.”

That lack of depth is slowing down the acquisition cycle, causing delays in awarding contracts and contributing to the increase of contract protests, he said.

However, the darkest cloud on the horizon is the federal budget and its impact on government operations.

Although many see business opportunities related to helping the government become more efficient, budget and debt problems have the potential to wreak havoc, Sloane said.

“My great concern is what happens if interest rates go up and, with it, the cost of debt service,” he said. “If debt service has a significant increase, we’ll see significant budget problems.”

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