Inacom Govt. Unit Targets Services

By Nick Wakeman, Staff WriterInacom Corp. plans to shift the focus of its newly acquired government business toward services offerings in areas such as help desk support, repairs and maintenance, and network design and development.With its February acquisition of Vanstar Corp., Inacom picked up $180 million in government business in a deal valued at $460 million. Inacom had little government business before buying Vanstar. The Atlanta-based reseller and services provider had overall revenue of about $2.6 billion in 1998, compared with Inacom's $4.3 billion in revenue.Product sales account for more than 80 percent of the Fairfax, Va.-based government unit's revenue, said Mark O'Donnell, vice president of Inacom's government systems unit. But "I wouldn't be surprised if in five years services are the lion's share of our business," he said. The combined company's services revenue is worth an estimated $800 million.The new Inacom has nearly $7 billion in revenue and 12,000 employees, including its Omaha, Neb., headquarters. The Vanstar deal is a plus for Inacom because it lessens the company's dependence on the distribution business and increases its services capabilities, said Michael Whitney, an analyst with the equity research company of Advest of Boston.The roots of Inacom's government business can be traced to Sysorex Information Systems, a $150 million a year value-added reseller based in Fairfax. It was acquired by Vanstar for $46 million in July 1997. O'Donnell, who has been with the government unit since its Sysorex days, said Inacom officials view the government as one of their top four accounts. What's more, they view the government as a customer rather than just a percentage of revenue, he said. "That means the level of focus is fairly high from [Inacom chief executive] Bill Fairfield," he said.O'Donnell would not comment on revenue targets or growth projections for his unit, which has 100 employees. Having gone through two acquisitions in less than two years, much of the unit's attention has been focused on transition and integration issues, he said. "This year will probably be the first year we'll really be focused on significantly growing the business," he said.The unit's added heft pushes it a "level above" its reseller competitors in the government space, such as Government Technology Services Inc. and Comark Federal Systems, both of Chantilly, Va., O'Donnell said.And its bigger size will help it compete for business against Wang Global of Billerica, Mass., and Unisys Corp. of Blue Bell, Pa., for services business, he said.Inacom's government unit will concentrate on two areas to grow its services business. It will further develop its existing life-cycle services in support of the products it sells. They include maintenance and repairs, help desk, network support and asset management.Also, it will add more professional services such as year 2000 assurance work, business process evaluations, Microsoft support and network design and implementation. The unit already does a significant amount of business with systems integrators throughout the Washington area on their large government contracts, according to O'Donnell. For example, his unit is on the Computer Sciences Corp. team that won one of NASA's Outsourcing Desktop Initiative contracts.Inacom's new government unit also is on a team led by Multimax Corp. of Largo, Md., which won one of the General Services Administration Seat Management contracts. Both are multibillion-dollar contracts for agencies to outsource their desktop computers and related networks.In the past year, O'Donnell's unit also has put its life-cycle service offerings on the GSA schedule. Those services will get a boost because Inacom now is the largest reseller and channel assembly partner for IBM, Hewlett-Packard and Compaq products."I think what our customers will see are better delivery, better service, better prices," he said. "We should have a significant leverage position being the new Inacom.""This is something we didn't do initially when we were purchased by Vanstar," he said. "We were more focused on the product segment of the business, trying to make sure we handled that part of the transition correctly before we really moved into the professional services business."The unit's business with civilian agencies is slightly larger than its Defense Department business. O'Donnell said he expects that mix to continue with the civilian market growing at a faster clip.Its biggest customer is Veterans Affairs through its Procurement of Computer Hardware and Software contract. The unit won the five-year, $1.5 billion task order contract in January 1997. The other winner was Digital Equipment Corp., now part of Compaq.Going forward, sales through the GSA schedule will play a very significant role. "I think that is why an Inacom is more interested in the government than in the past because the government is moving toward a commercial-like model," O'Donnell said.