Online Extra: Full transcript of Alfred Mockett interview

Why did you decide to come to AMS? Two or three years ago when I was building a professional services organization for BT, we were looking for a U.S.-based acquisition target, so we took a look at Cambridge Technologies, AMS and a few others. I had the benefit of the best research and some investment banking opinion behind me. Then a headhunter came calling, and I was intrigued with the proposition. One meeting led to another. What is different about working here as opposed to the United Kingdom? I've spent most of my working life here. I moved here in 1976. I've been a U.S. citizen for more than 20 years. But as it happens, the last three or four years of my life I've been commuting weekly across the Atlantic, so you can see [the difference] in stark relief. The two continents are converging in terms of business approach. When I first started working in London in 1971, you could walk down the center of the road at 9 o'clock in the morning and not be at risk. Nowadays there are traffic jams at 6:30; London's a very different place. When you were at British Telecom, you built an organization from scratch. At AMS, you have an institution that's already in place. How do your experiences from BT translate here, and what do you have to do with an organization that you've inherited? My experience of being a business builder goes back much further than BT, 25 years of building businesses. I have a track record of growing revenues. I've a track record of taking different components and building blocks and reconfiguring them, then using that as a platform for growth. I've spent 25 years in the technology business, and I've been in a constant change-management environment. In my career, I've never had the privilege nor, perhaps, the misfortune of managing in steady-state conditions. Not just change, but an ever-increasing pace of change. I think all of this is ideally suited for what lies ahead for AMS. What are you trying to accomplish in your first 100 days? Teddy Roosevelt [said] we're not making revolution, we're recognizing and giving shape to evolution. I set myself not 100 days, but 120 days. A nice calendar period, four months. I wanted to take that time to craft a compelling vision of the future for AMS, to articulate a strategy, to deliver that vision and then to underpin it with a robust set of business plans and programs to deliver the operational and financial performance. To do that, my first approach was to look at the company through different sets of eyes. Through whose set of eyes? The most important set of eyes was the customer set of eyes. So the first 30 to 60 days, I visited more than 30 clients in six countries. My second port of call was the investor base, our owners. I've now talked to owners that account for more than 30 percent of the stock. The final constituency is the employees, and I've been in front of close to half our employees personally. We've now done two ... briefings for my kick-off meeting, and it has cascaded all the way down throughout the organization, and now we're getting cascaded feedback in return. So taking the views from those three constituencies, while working in parallel on a strategic rethink and looking at the business model, those all should converge in April. At that point we're committed to laying out our story. As you have talked to the constituencies, are there themes or common threads that have shown up? The customers were very flattered that a CEO in his first month of tenure would be pounding on the door, saying 'Talk to me and tell me what we're doing right, tell me where we can improve, where can we raise our game. Give me an open and honest scorecard.' They found that quite refreshing and flattering and were generally very complimentary about AMS. The message that comes back from the customer base is AMS has great people doing great things for their customers. They say we have a solid business foundation, deeply rooted in honesty, integrity, trust?they look on us as a trusted partnership. The key attribute for the customers for AMS is a deep, vertical industry knowledge. They say, 'Your people know my industry sector as well as anybody in my company, they know my company as well as anybody in my company.' I think the best compliment I heard from the customer base was, after AMS has been in there a few weeks they can't distinguish between the AMSers and their own project team, completely integrated into the fabric of the company. That really creates a tremendous fund of goodwill. They're almost willing us to win. That's produced a very loyal customer base, and that's got to be AMS' strongest attribute. Did you also talk to government customers? I've covered the Department of Defense, the Armed Forces, federal civilian, state and local as well as all our commercial sectors. Historically, AMS has been about 50-50 between government customers and the commercial sector. Do you want to maintain that mix? I think that's a great mix. If anything, I'd like to reinforce our commitment to the public sector. Perhaps historically, AMS has been a little bit embarrassed or apologetic about its penetration of the public sector. Now it appears to be flavor of the month. I guess AMS' investment in growing that particular sector has really paid off. It's the one bright spot on the otherwise quite cloudy horizon for our industry. You have a strong presence in state and local as well as the federal government sector. Where do you see the company's strengths and weaknesses in these markets? If I recall correctly, there are 67 federal civilian agencies. We're in 90 percent of those. We are in 43 of 50 states. We are in all departments in the Department of Defense and all branches of the Armed Forces. That is tremendous depth and breadth of penetration in the public sector, built on years and years of successful client assignments. This business does not have, as it stands today, annuity revenue streams. It is not characterized by multiyear contracts. That makes the 85 percent follow-on business figure even more remarkable, because this is a series of projects that rolls from one to another. It's based on successfully delivering on the previous project. To actually get an 85 percent renewal rate within a customer base, based on project work or the multiyear contracts, is really quite remarkable. What do you see as the company's core strengths in the government marketplace, particularly the federal marketplace, given the changed circumstances of the last several months? AMS' core strength is that it is well positioned in leading-edge commercial sectors as well as public sectors. It makes us a much better servant of the public sector by having that commercial-sector expertise. That probably differentiates AMS from some of the suppliers that focus exclusively on subsets of the public sector.I think your question was implying what happens now with homeland defense and since 9-11. That plays to AMS' core strengths. The world changed Sept. 11. Securing America's interests at home and abroad are going to require timely collection, analysis and interpretation and sharing of information. Nine-11 was the catalyst to make that happen. Hitherto, we had thousands of data sources, hundreds of agencies processing the data on disparate databases, using disparate systems, and not talking to each other. I think 9-11 has become the trigger, the enabler, that is going to force the breakdown of those legal, structural, cultural silos within government to make sure that federal talks to state talks to local and collaborates in the exchange of information to deliver what's expected of the homeland defense initiative. AMS has had a rocky time with two high-profile lawsuits: one with the state of Mississippi and now another with the Federal Retirement Thrift Investment Board. How has that affected the company? First of all, AMS has delivered more than 5,000 successful engagements for clients for more than 30 years. Two of those have resulted in lawsuits. That's not a bad batting average. With that said, one lawsuit is one lawsuit too many, and I would like to keep AMS out of the lawsuit business. The Mississippi [case] is a closed chapter. All the litigation has been settled. We have settled with the insurance companies, and we've used the cash proceeds to retire all the debt. So now we're sitting with a very robust balance sheet, zero debt, cash on the balance sheet, producing cash flow from operations, which is quite a privileged position to be in the teeth of a recession, and which positions us very nicely for the rebound. And the thrift board? I'm pleased to see we've prevailed in the first round, and they were kicked out of federal district court for lack of jurisdiction. Our position on this has always been, and continues to be, that we have a federal contract in dispute. There is a prescribed, proven methodology for resolving disputes on federal contracts. It is the federal court of claims. There's a well-trodden path to the federal court of claims; many have gone before us, many will go after us. The contract in dispute actually prescribes the federal court of claims as the forum for arbitration. Our view is that is where it needs to be dealt with, and ultimately that is where it will be dealt with. How have other government customers reacted? The lawsuits appear to be a non-issue with the clients that I've talked to, and I've talked to more than 30. I think they recognize that we've demonstrated a track record of success. What about internally? Are there any morale issues related to this or what the company has gone through, including layoffs? Everybody within our sector had to right-size this year, and certainly my view is that we've got the employment base now at a level that's consistent with our forward view of the market, so I don't anticipate any other layoffs. With that said, I've said often to the employees, 'You know circumstances can change, and there can be no commitments in that regard,' but we believe we have it right-sized. The employees' morale is very high at the moment. It seems an invigorated, energized environment. Not only is there an expectation for change, there's sort of an eager anticipation of it. Everybody's enthused, and it's a fun place to work. You talked about your enviable cash position, zero debt and such. Does that mean you'll be looking at possible acquisitions or areas in which you'd like to expand? My track record shows merger and acquisition activity as a long suit. At the right time, I'll bring that suit to bear. At the moment, I'm looking at how to grow AMS organically from the existing business base. At the right time, there is an opportunity to supplement and accelerate that growth rate with a series of skills-based acquisitions. If we look at this industry, the important things to have are customer base, contract base, people and intellectual property. As I said, once we've done the gap analysis, we'll look at either filling the gaps with acquisitions, with partnerships or reallocating resources within AMS. Is there anything keeping you awake at night at the moment? The only things that keep me awake are the things I can't control. I think the external environment is a concern for me. We're a country at war. The president spent more than half the State of the Union address firmly establishing the country on a war footing. That makes things perhaps a little less predictable. But therein, of course, also lies an opportunity. If we look at the appropriation for homeland defense during this budget year, I believe it tops out at just short of $20 billion. Most of that has probably been earmarked for emergency response and physical security. Next year the appropriation is for $38 billion, so it's an incremental $18 billion. We only need a very small share of that ... to make a big difference to AMS. It's reasonable to assume that a fair proportion of that will be allocated to information technology. As we move into the next phase of this war, we're moving from bombs and bullets to information technology as being the primary weapon against terrorism.We need to address three key public policy issues. First of all, how do we improve security while not adversely impacting personal freedoms and our ability to conduct commerce? Secondly, how do we manage risk more aggressively without putting an undue economic burden on industry and government? Thirdly, how do we break down the legal, structural, organizational, cultural barriers between agencies, between federal, state and local, that prevent the timely sharing of information that would allow us to respond to as-yet-unforeseen threats to the homeland? This is a huge appropriation. It needs to be spent wisely.Our position with government is that the best use of proceeds is not to chase whiz-bang technology and futures and vaporware, but to take what you've got and make it work better?but more importantly, to make it work together. Take tried and proven technology that's already deployed in a commercial environment and reapply it within the public sector. At the same time, tie public and private sector together. Do you have any examples in mind? We're doing a trial?this really plays to AMS' core strengths, taking disparate databases, disparate information feeds operating under different architectures and different systems, bringing it together, putting a decision engine on top of it and turning data into real-time actionable information.In Pennsylvania, we're working with the Department of Motor Vehicles on driver's license applications. What we're doing is, at the point of application, bringing the applicant and the state's database together with commercially available databases, such as credit files, real estate records, a range of commercially available databases, so when that applicant presents him- or herself for a driver's license, you can validate that individual is who he or she purports to be. The fact is, if somebody applies for a driver's license, and here's not a single credit card transaction in their history, there's no record of any bank accounts, there's no record of their living at that address--there's no record of them living anywhere?it will throw up a few flags. It just strikes me that this is a very common-sense application of the here-and-now as opposed to reinventing the wheel. What do you do with the profile that is created, after you validate that the person is who he or she says? This is real-time access of live databases. You don't create a secondary record; the only record that remains is the driver's license application, which is the document of record. But you helped validate it. This is something that happens: AMS uses these decision engines millions of times a day to approve credit applications for our clients or approve individual credit transactions. There are many other areas where you can see this type of application, just accessing commercially available databases and tying it together with a government database. In putting together a system such as that, what safeguards does Pennsylvania look for you to provide so the information is not misused or accessed by unauthorized people? It requires compliance procedures, whether we're talking internally with AMS or externally with the client. We have an engagement management framework that really sets out, if you like, the dos and don'ts and the expectations and the risks on both sides. I think compliance with all legislation, including personal freedom, is very important. It is a public policy debate?that's why I raised it. There's no easy answer. what's your take the on the market right now? Within the economic uncertainty, we have an industry that is probably going to grow in low- to mid-single digits, whereas historically it has enjoyed comfortable double-digit growth. I think it's an economy that's going to have a rough six months with a back-end recovery. When I talk to economists about the recession and [ask] whether it's V-shaped or U-shaped, they say it's bathtub-shaped. I'm rather anxious to get to the tap end.I think after this year of uncertainty, the industry will normalize and get back to double-digit growth rates. Within that, of course, we see federal spending as being one of the highlights of the year. Telecoms and financial services are still depressed, to put it kindly. It's difficult to say whether it's actually bottomed, but it's there or thereabouts, give or take a quarter. There's also geographical disparity; in the year that just ended, Europe is showing more strength perhaps than the United States. I guess convention would have it that Europe is on about a six-month lag cycle to the United States, so as the United States recovers, we'll expect a slower recovery in Europe. That's the external market perspective. Describe your management style. To work more effectively from the beginning, did you bring people with you, or do you have plans to bring people that you've worked with into the organization? With regard to style, I pride myself on being open, collaborative and pursuing an open-door policy. My approach is communications, from the shop floor to the boardroom. I'm a team builder. I've been characterized as a ruthless delegator, but with delegation comes strict levels of accountability and responsibility.I'm obsessively focused on results, so I'm achievement oriented. I deliver on my commitments; I have a track record of delivering on operational and financial commitments. In fact, at BT in 10 years I only missed my commitments in one. In nine out of 10 years, I nailed my operational and financial commitments to the company and the stockholders. So that's Alfred Mockett.I pride myself on having built some of the strongest teams in the industry. In my time at BT, I built four discrete teams that created four FTSE 100 chief executives, plus half the executive committee at BT. I build teams on a mix-and-match basis, taking the best of the talent from the inside and bringing in selected talent from the outside.Change management needs catalysts. ... This is an organization that is very receptive to change, so it doesn't take too many catalysts. But there will be some, so watch this space. Have you brought in any catalysts yet? Well, just watch this space. How many of these interviews have you done since you became CEO? In terms of press interviews, I have only given two. It's been in the local [metropolitan Washington] community, which is important, because I really believe ... AMS is a jewel in the metro crown. This has got to be a company that's a local champion. More than half our employment base is in the metro area. We pump $400 million a year back into this economy. The payroll alone in the metro area is $300 million. By the time you add in the range of taxes we pay, the local vendors and suppliers we support, that's a significant contribution to the health and wealth of this community. What issues do you think should be covered in an interview such as this, but that no one ever seems to get right? we're in a state of flux with AMS at the moment. ... When we finally crafted the full vision, mission, strategy and we're ready to unveil it, then we'll be much more extensive in media communications. I like to be as honest and open as I can with the media, reach out as often as I can and make sure we have an ongoing dialogue. Perhaps that's a slightly different style to the one you've seen from AMS in the past. So you can expect a lot more of this.