Vredenburg Eyes More Niche Acquisitions

By Nick Wakeman, Staff WriterVredenburg of Reston, Va., plans to follow its recent acquisition of Highland Technologies Inc. of Lanham, Md., with other document management and imaging deals, company officials said.Vredenburg, a systems integrator that traditionally provided program management and procurement support services to the Navy, will make these moves to strengthen its VITGroup, an information technology business unit formed last year. It is also based in Reston.The company wants to make acquisitions in niche government market areas that will bring access to new customers and new document management technologies, said Larry Den, vice president in charge of the VITGroup."There has to be a product and technology fit," said Den. Another acquisition could come by the end of the year, he said.Vredenburg formed the VITGroup in January 1998 to pull together its information technology capabilities and broaden its customer base, Den said."They have done a very careful diversification," said Jerry Grossman, a director at the investment banking firm Houlihan, Lokey Howard & Zukin of McLean, Va. "It has been very carefully planned and is being carefully carried out."Grossman said the company is making a smart move to buy a technology it knows and to stay focused on a market — the government — that it knows well.The acquisition of Highland March 16 follows a three-year relationship in which Highland provided the software piece for Vredenburg projects as Vredenburg began targeting electronic Freedom of Information Act management systems as a new market, Den said. Vredenburg would provide the consulting and integration services using Highland's software as the heart of the systems.The companies have won projects together for the Justice Department, the Drug Enforcement Agency, the FBI and the National Security Agency.Vredenburg bought Highland for an undisclosed amount. Highland has about 60 employees, said Carl Muller, vice president and co-founder of Highland. Officials with both companies would not disclose revenue figures for Highland.Vredenburg had about $26 million in 1998 revenue with about $7 million coming from the VITGroup, Den said. Vredenburg has more than 200 employees.In the Freedom of Information Act market, Vredenburg has been competing with the likes of BTG Inc. of Fairfax, Va., and Eastman Software Inc. of Billerica, Mass., Den said.The systems Vredenburg builds let agencies electronically manage requests for documents and include case management, records management and imaging, he said.Highland's HighView software has been the cornerstone of many of the wins, said Jorge Diaz, director of sales and marketing for Vredenburg's IT unit. Highland and Vredenburg have worked closely together to marry the Highland software with the Vredenburg's consulting and services capabilities."We have to present a total solution to the customer," he said.Since forming the partnership three years ago with Vredenburg, Highland has been adding document management and imaging features to its products that are specific to Freedom of Information Act issues, Diaz said.The goal is to minimize the customization that Vredenburg needs to do with each implementation, Diaz said. The more standardization, the faster an implementation can be completed, he said.With the acquisition, Highland will be able to concentrate even more on research and development and improving its software products, Muller said."Our development efforts would suffer when we would get a big deal and we would have to pour all our resources into it to get the job done," Muller said.But now Vredenburg will supply the support services, such as training, maintenance and troubleshooting, that Highland had provided to customers in the past, he said.Highland will continue to operate as a separate unit based in Lanham and will keep working with other value-added resellers and systems integrators in the commercial markets, Diaz said.Only Vredenburg will be able to sell Highland products in the intelligence, Defense Department and law enforcement markets, he said. "We want to minimize channel conflicts," he said.The other VARs will not suffer because of the purchase by VITGroup, Muller said. "This will allow us to build better products for them," he said.There is still plenty of work to do in Vredenburg's market of Freedom of Information Act request systems, according to Patrice McDermott, an information policy analyst at OMB Watch, a non-profit regulatory watchdog group in Washington.While nearly all government agencies have a Freedom of Information Act Web page, few are in full compliance with legal requirements, she said.In 1996, Congress passed the Electronic Freedom of Information Act that required agencies to allow people to use the Internet to request and receive information. The deadline for compliance was March 1998.Most sites have addresses and guidelines for making requests online, but few have the capability for electronic requests, she said. There is slow movement toward compliance, but "one of the largest problems is that there is no standardization," McDermott said.