Intellisource Takes On Big Players

By Nick Wakeman, Staff WriterWith a new headquarters and a new chief executive at the helm, Intellisource Inc. is charting a strategy to distinguish itself from much larger competitors in the government systems integration and IT outsourcing market."We are sort of caught in the middle, in the twilight zone," said Michael Berta, Intellisource president and CEO. The $140 million-a-year company does not qualify for small business or minority ownership programs, so it constantly bumps heads with large competitors, such as Computer Sciences Corp., Lockheed Martin Corp., and Science Applications International Corp."Our challenge is convincing potential customers that size is not the determining factor of doing the job," Berta said.Intellisource provides systems integration and outsourcing services in areas such as network management, telecommunications and desktop computers. About 60 percent of the company's revenue in 1999 will come from the federal government. The other 40 percent will come from commercial customers.So far, Intellisource has been successful convincing customers that it can provide the same outsourcing services as larger companies. Revenue has grown from $110 million in 1998 to a projected $140 million in 1999, Berta said.The company was formed in May 1998, when Intellisource's majority owner, Safeguard Scientifics Inc. of Wayne, Pa., decided to merge Intellisource, then of Fairfield, Conn., with RMS Information Systems Inc. of Vienna, Va., another company in which Safeguard had a major stake. The new entity was called Intellisource Group and was based in Fairfield."They have been chugging along pretty well," said Eric Ross, an analyst with the equity research firm H.C. Wainwright & Co. of Boston.Evidence of that solid performance includes a $20 million task order NASA awarded to Intellisource in late October to run desktop services at the Goddard Space Flight Center in Greenbelt, Md. That work is being done under NASA's Outsourcing Desktop Initiative (ODIN) contract. Other major customers include the Federal Aviation Administration, the Air Force, the Coast Guard and the Defense Department.The past year also has been spent integrating RMS and Intellisource, Berta said. The last step in that integration was moving the corporate headquarters from Fairfield to Vienna in late June. Other major offices include Atlanta and Houston.With most of its operations in the southern part of the United States, it did not make sense for the company's headquarters to be in Connecticut, he said. "You ought to be where your customers are," he said. Another change was the appointment of Berta to the CEO post in June. He replaced Charles Gibbons, a Connecticut resident who remains chairman of the board. Berta already was president and chief operating officer of Intellisource.As the new CEO, Berta does not envision major shifts in the company's strategy, which will remain focused on outsourcing and IT services opportunities.Intellisource's majority owner, Safeguard, has a long-term goal of taking the company public, but Berta said there is no deadline or target date. Safeguard, which had about $2 billion in 1998 revenue, invests in and helps develop technology companies, many of which are spun out in public offerings."Their plan is to have companies ready to go public," Berta said. "But my own view is if you operate as if you are a public company and you build shareholder value, then these other things take care of themselves."Intellisource still is a "developing" company for Safeguard, said Ross, who follows Safeguard. "I think they are still reinventing themselves," he said.While Berta would not rule out acquisitions if the right opportunity presented itself, Intellisource's growth will come from winning new business, he said. The ODIN contract is a key part of the company's growth strategy. "ODIN is a real example of where the government doesn't have to use its own people to keep up with technology," Berta said. "NASA is trying to introduce other agencies to that model."To help its performance on the task order at Goddard, Intellisource this month opened a 6,000 square-foot operations center adjacent to the space center.Opening a center like that also shows potential customers that "we have as much capability as a Lockheed," Berta said.