IITRI Prepares to Raise Its Low Profile

By Patience Wait, Staff WriterUntil Carnivore, the IIT Research Institute may have been one of the best-kept secrets in high technology.The request by the FBI for IITRI to evaluate its e-mail monitoring software, called Carnivore, attracted the attention of media worldwide. But that was a minor, $175,000 contract, said Bahman Atefi, IITRI's president of the not-for-profit engineering and research group."We win a quarter-billion dollar contract for the Joint Spectrum Center, and we just get a paragraph here and there," he said, referring to a $275 million contract the company won in August 2000 from the Defense Department.IITRI, which started as a research arm of the Illinois Institute of Technology in 1936, has evolved into a high-end engineering, research and consulting company. And if Atefi can successfully carry out plans to infuse the organization with an entrepreneurial spirit, he expects IITRI's revenue and profits to grow at a pace that will continue garnering media attention.Atefi hopes to create a company that only pursues cutting-edge research and engineering opportunities. When IITRI develops products and services that are commercially viable for broader markets, Atefi wants to license them or spin them off into ventures for others to further develop."By and large, we're interested in the high end, where [a project] has elements of developing the science and creating intellectual property," Atefi said. As long as a project has some unique scientific attribute that will enhance IITRI's reputation, the company will continue it, he said.IITRI is headquartered in McLean, Va. When Atefi joined as president in August 1997, the company had revenue of about $118 million. After staying relatively flat for two years, revenue grew from $123 million in fiscal 1999, which ended Sept. 30, 1999, to $164 million in 2000. Atefi is projecting $200 million for fiscal 2001. Earnings, meanwhile, have grown from $4.4 million in 1999 to $7.9 million in 2000. The projection for 2001 is $14.2 million.IITRI's government work brings in about 80 percent of its revenue, but the company is planning to beef up its commercial work, said Stacy Mendler, senior vice president and director of administration."IITRI has always been highly regarded as a quasi-FFRDC, a federally funded research and development center," said Ray Bjorklund of Federal Sources Inc., a market research firm in McLean. "They are held in somewhat high regard as very good engineers, a very good technical services organization."IITRI's largest contract is with the Defense Department's Joint Spectrum Center. IITRI has been the military's partner in operating the center since its founding in 1960, said Army Col. Joseph Yavorsky, the center's commander. The center provides experts in spectrum planning, electromagnetic compatibility and vulnerability, modeling and simulation, operations support and information systems services to support the military.Spectrum management is the coordination of communications and electromagnetic frequencies among the gamut of equipment found in the field, particularly for battle-bound troops and machinery, to prevent interference and maximize efficiencies. IITRI employs somewhere between 450 and 500 people in direct support of the Joint Spectrum Center, Yavorsky said. While the skill set the company employs is not unique, the company is unique in that it has a large pool of resources to draw upon.Spectrum management is an arcane field that colleges and universities do not provide much training in. It is more like tribal knowledge, Yavorsky said, "like it's passed from father to son."Spectrum management also is a vital consideration for telecommunications. Atefi is looking for IITRI to extend its spectrum expertise as the wireless communications market continues to evolve. "We've always had wireless as a core competence," he said. "Through all of that, we've been working on the idea of next-generation wireless devices, not just the next incremental improvement. Spectrum is like real estate, and we're running out of it."The company's expertise extends beyond electromagnetic research and spectrum management. IITRI also has a life sciences division, which has developed models and toxicology studies for government and commercial clients. From that base, it has formed a chemical and bio-defense technologies division, which develops biological warfare detection and containment systems.The company also has an explosive-science division, which covers everything from developing ways to destroy chemical weapons to new technologies for destroying unexploded ordnance, such as land mines. In his office, Atefi keeps a minefield warning sign, a dramatic reminder of the company's interest in the subject.IITRI acquired HFA Inc., a company that removes unexploded ordnance, in November 1998. Atefi declined to say how much IITRI paid for the firm. Atefi estimated the U.S. market for cleaning up unexploded shells and weapons at about $60 billion, with government agencies spending about $150 million each year on cleanup projects around the country. It's a massive safety problem from old military ranges that over the years have been encroached upon by suburban development, he said. Acquiring HFA "marries our high-tech knowledge with their hands-on experience," he said.The newest area of growth for IITRI is defense operational support. The company has long conducted modeling and simulation programs for a variety of industries, such as transportation. It acquired AB Technologies Inc., a firm staffed largely with former military personnel, in February 2000 in order to expand its knowledge of requirements for large-scale military planning and operations, and combine that knowledge base with IITRI's expertise in modeling and simulation."Modeling and simulation is the wave of the future for DoD," Atefi said. "For us, it was natural to move into [this niche]."Navy Capt. David Johnson, deputy director of the Defense Modeling and Simulation Office, said IITRI provides support to the office's Modeling and Simulation Information Analysis Center, helping develop policies and procedures for modeling and simulation activities throughout the Defense Department."They provide the subject matter experts in the different areas they are tasked by [various] parts of the department community to look into," Johnson said. "They're more like 411 than 911."Atefi said there are advantages to being a not-for-profit organization in the technology world. "We're seen as an objective agent, not a biased agent," he said. "We're not trying to push product." He said that provides a level of credibility with the government, IITRI's primary client base.But there are drawbacks. When Atefi arrived, "this was a jewel of a place, with incredible depth technically, but not the entrepreneurial [spirit] of our for-profit competitors." That helped explain IITRI's lack of visibility, he said. Now that the mindset is changing at IITRI, business spinoffs and product licenses will join intellectual stimulation as motivations, Atefi said. "Being not-for-profit doesn't mean you can't be entrepreneurial."