Unisys seeks big-player status

Ira Kirsch is blunt when asked why he was brought in last April to lead Unisys Corp.'s federal unit."Because I wasn't an incumbent," he said. A 30-year employee of the Blue Bell, Pa., company, Kirsch said he had worked in just about every other part of the business when he was appointed president of the Unisys U.S. Federal Government Group. His appointment signaled that Unisys, after looking to possibly sell the federal group, had opted instead to reorganize and re-energize its government business. Chairman and Chief Executive Lawrence Weinbach brought Kirsch in with clear marching orders to integrate the federal unit with the rest of the company. One of the reasons the group had been on the sales block was that it often operated as an independent unit, Kirsch said. His chief goals are to bring the company's commercial best practices to the government sector, take federal best practices to the rest of the company, and use off-the-shelf products whenever possible. Although tapped to change the federal group, Kirsch emphasized he has never worked with more talented people than he found among the unit's 3,000 employees. "I wasn't brought in to tear the federal group apart, but to bring it to the next level," he said.That next level, Kirsch said, is to make the federal group a $1 billion annual business, a size that would allow it to be a major player in the federal market. Kirsch declined to provide revenue figures for the federal group, but industry analysts estimated that it brings in $500 million to $700 million annually in technology services work.Greg Baroni, Kirsch's boss and head of all government business for Unisys, said the federal group already is seeing positive results. For example, last August the company won a General Services Administration's Federal Supply Service outsourcing contract worth about $300 million over 10 years. Called the FSS Applications Maintenance and Enhancements contract, or FAME, the contract calls for the outsourcing to Unisys of maintenance and enhancement services for many FSS applications, such as GSA Advantage and Web site and departmental applications. Unisys has more than 200 people on this job.Last June, the federal group was part of a team that won the $1.7 billion Air Force Joint Technical Test and Training Support contract, called J-Tech. The prime contractor is JT3 LLC, a joint venture owned by EG&G Technical Services Inc., Gaithersburg, Md., and Raytheon Co., Lexington, Mass.Under this 15-year contract, worth at least $300 million to Unisys, the company will provide support in areas such as information technology, computer security, telecommunications and software development. About 250 Unisys employees are working on this contract.The federal group "is going to be the centerpiece of everything we do in global public sector," Baroni said. Baroni's presence also signals a change in business at Unisys. In October he was named president of Unisys Global Public Sector and given responsibility for coordinating the company's government business. This marked the first time the federal group was placed under global public sector, which includes Unisys' U.S. and international state and local business."We saw the opportunity to synergize the federal, state and local, and global public sector by putting them in just one unit," said Baroni, who joined Unisys after almost 20 years at KPMG Consulting Inc., McLean, Va. A unified government organization can provide better solutions in areas such as public safety and health care, where many federal and state and local responsibilities overlap, he said.Unisys also has established a homeland security task force that draws from resources and solutions throughout the company. It has presented five white papers in response to a Transportation Department request for innovative research, and has pilot projects at airports and with the Defense Department for facial recognition security.Baroni estimated Unisys' global government business accounts for about one-third of the company's overall revenue of $6 billion.Unisys badly needs a shot in the arm from its public-sector group. The company in January reported a net loss of $169 million for the fourth quarter of 2001, due largely to a charge to eliminate 3,750 positions worldwide. Unisys reported a loss of $67 million for 2001, compared to net earnings of $225 million in 2000.John Jones Jr., a security analyst for the computer industry for Solomon Smith Barney of New York, said that for Unisys to rebound in 2002, it must have strong earnings in its services business in both the public and private sectors. "And the key to gross margins in its services business will be the gross margins in systems integration and consulting work," he said.Jones and other analysts said the Unisys federal group would benefit by bulking up and increasing its annual revenue. The government's move toward increased outsourcing and bundling of smaller contracts into single contracts makes it harder for smaller IT companies to compete as primes. "I would agree that bigger is better," said Richard Knop, managing partner with the investment bank Windsor Group LLC, Middleburg, Va. "You have to have the full complement of capabilities in IT services and the revenue base to compete for these contracts."But Unisys also faces strong competition from companies such as Electronic Data Systems Corp., General Dynamics Corp. and Northrop Grumman Corp., which are larger and have a stronger presence among government agencies, said Jerry Grossman, managing director at Houlihan Lokey Howard & Zukin, McLean, Va."The federal market might be the best market for Unisys to pursue right now, but it's up against tough competition," he said.Despite these challenges, Baroni and Kirsch said the company is up to the task. Unisys will look to grow the unit by winning new business and through strategic purchases aimed at acquiring new agency customers, the executives said.Kirsch also is aiming to make the Unisys the market leader for customer relationship management solutions that help federal agencies provide effective e-services to citizens and business. Unisys has a number of recent wins for CRM solutions, including contracts in June with the Immigration and Naturalization Service for a call center implementation, in August with the U.S. Transportation Command for integrated customer support, and in September with the Pension Benefits Guaranty Corp. for consulting to assess its customer vision and approach.The company has carefully selected its partners, said Kirsch, mentioning Computer Sciences Corp., EDS and Siebel Systems Inc. as partners and Science Applications International Corp. as a potential partner. "I want fewer partnerships, but more strongly aligned partnerships," he said. Overall, the federal unit is emphasizing its services and technology solutions and trying to establish closer relationships with potential customers."We are trying to be that trusted adviser that brings solutions to the table for our clients, and not just in the business of answering RFPs," Kirsch said.