No. 2: Northrop takes aim on health IT

Having posted $5.5 billion in prime IT contracting revenue in 2005, Northrop Grumman Corp. is eager to maintain that momentum in the years ahead by expanding its work in areas such as health care IT, outsourcing and wireless solutions, to name a few, said James O'Neill, corporate vice president and president of Northrop Grumman Information Technology of McLean, Va. It also will chase bigger contracts, he said.The IT sector will continue to research, develop and demonstrate its solutions for an area O'Neill said he believes has huge growth potential: federal health care IT.Northrop Grumman IT's acquisition of Integic Corp., a privately held company specializing in IT solutions for enterprise health and business process management, gave it a big boost in this area. The company completed its purchase of the Chantilly, Va., company in March 2005. Terms of the deal were not disclosed.The acquisition also is expected to increase Northrop Grumman's offerings in human resources systems and business process management solutions.The combination of the two companies helped the division win the National Health Information Network contract, O'Neill said. Under the contract, sponsored by the Centers for Disease Control and Prevention, the company will develop an architecture and prototype network for secure information-sharing among hospitals, laboratories, pharmacies and physicians in the three participating markets.Northrop Grumman, along with Accenture Ltd., Computer Sciences Corp. and IBM Corp, head teams that will share contracts totaling $18.6 million.Northrop Grumman also is pursuing opportunities in CDC's Public Health Information Network, in surveillance of global disease and biological syndromes, and in military health records.Integic was "a pretty good, strategic choice" for Northrop Grumman IT to get into the health care market, said Ray Bjorklund, senior vice president and chief knowledge officer of Federal Sources Inc.Wireless technology will play an integral part in health care IT systems, letting medical professionals walk around in a secure wireless environment and send and receive data in real time, O'Neill said.The company's IT business segment is pursuing wireless work in other areas as well. Northrop Grumman is dueling with Motorola Inc. for a contract to supply a wireless infrastructure for first responders in New York, he said. New York City's Information Technology and Telecommunications Department has not disclosed the value of the contract.Last year, the company landed two key outsourcing deals from state and local governments, O'Neill said. Earlier this year, it won a seven-year, $667 million deal from the San Diego County Board of Supervisors to manage the county's IT and telecom services. Northrop Grumman replaced CSC as the incumbent contractor on the project and is overseeing San Diego County's data center, help desk, desktops, network, applications and cross-functional IT and telecom services.In the fourth quarter of 2005, it landed a 10-year contract valued at about $2 billion to transform and improve Virginia's IT infrastructure, used by state agencies to deliver services to citizens."Outsourcing, in particular, is something that we really found to be a winning formula," said O'Neill, who has led the IT sector since May 2004.Northrop Grumman IT has robust state and local government business, "all of which revolves around outsourcing," O'Neill said. He said he expects to see more IT outsourcing opportunities coming from federal agencies as the number of retiring workers increases.Northrop Grumman IT will continue to focus on other large opportunities in the federal arena, as well as selected state and local government, and commercial and international opportunities, O'Neill said."As the sector grows, we'll need larger procurements," he said. "We're going after much larger, heavily technically based solutions to grow the [IT] sector at a faster rate."Such programs could be worth more than $1 billion, although O'Neill said he could not divulge any particular ones.Earlier this year, Northrop Grumman's new technical services sector was part of a joint venture called National Security Technologies LLC, which won a five-year, $2.5 billion contract from the Energy Department to manage and operate the Nevada Test Site. It defeated teams led by incumbent Bechtel Nevada Corp. and Washington International Group Inc."It's a very large marketplace that always needs refreshing, because technology never stands still," O'Neill said.But the federal IT marketplace for such large opportunities is looking leaner, Bjorklund said. The Homeland Security Department's Eagle and the General Services Administration's Alliant programs are two of the last large ones expected for 18 to 24 months. Northrop Grumman IT "has the scale to compete for those mega deals," but is up against a handful of companies from the upper tier of the Top 100, he said.In January, Northrop Grumman decided to close its IT reseller business, no longer seeing it as a strategic fit for the company. The reseller unit, a part of the IT business sector, had 2005 revenue of $728 million, a decrease of $139 million, or 16 percent, over its 2004 sales, according to Northrop Grumman's filings with the Securities and Exchange Commission.