No. 16: ITT makes a push into new markets

ITT Corp. instituted a new strategy for its defense business in 2006, creating a market-based approach to replace its earlier division-centric orientation.The decision helped the company move into new markets, attract new customers and increase sales, said Steve Gaffney, president of ITT Defense.The $8 billion global engineering and manufacturing giant changed its name from ITT Industries Inc. to ITT Corp. in 2006. It reached the No. 16 spot on Washington Technology's Top 100 with about $1.5 billion in prime government contracting revenue."We realized that the real value that we have within our defense business lies not within its divisions but between the divisions," Gaffney said. "So the goal was to try to get all of our employees to act as one team with one mission. And now we're doing that corporatewide as well, which means we're leveraging the strengths of all that we bring to the market to better serve our customers."For ITT's government business, the impact has been almost immediate. For example, the company entered the security and surveillance market in the Middle East with wins supporting the U.S. Navy in Bahrain. The night vision group was able to build beyond its strong domestic presence to win a contract from the Norwegian Defence Procurement Division for 4,400 night vision systems. The electronic systems group won a $78 million contract from the U.S. Air Force to provide integrated defense electronics for Pakistan's fleet of F-16 aircraft.And the advanced engineering group won a contract providing comprehensive engineering support to the Defense Information Systems Agency's Joint Spectrum Center, which could ultimately be worth $545 million."The opportunities that we're bidding today are significantly more robust than we would have bid a year ago," Gaffney said.A good example, he said, is the Federal Aviation Administration's air traffic control upgrade. ITT leads a team that was one of three bidders recently picked to submit a proposal for the Automatic Dependent Surveillance-Broadcast program. The contract, expected to be awarded later this year, is the first building block of the Next Generation Air Transportation Systems, which, when completed in 2025, will transform air traffic control from a ground-based system of radars to a satellite-based system. The ITT team includes AT&T Inc., PricewaterhouseCoopers, Thales North America Inc. and Science Applications International Corp."It was bigger than one division," Gaffney said. "So we were able to leverage the strengths across the value centers, but we were also willing to confront reality and recognize areas where we weren't as strong. In this case, even though we have a communications business, we felt that Thales was better for this contract. As a result, I think we're providing a better value solution for the government."The company continued to fare well in its core competencies in the past year, too. Sales of the company's Single-Channel Ground and Airborne Radio System (Sincgars) tactical radios remained strong, with the Army placing new orders valued at more than $650 million. The ITT Systems group won a $152 million contract to provide operations, maintenance, repair and supply support for the Army's Information Technology, E-Commerce and Commercial Contracting Center-West at Fort Huachuca, Ariz. And the advanced engineering group had a 100 percent win rate on all recompetes.However, 2006 was not all rosy for ITT. Authorities accused the company's night vision group of exporting classified technical data to foreign countries without authorization. The company entered a plea agreement with the Justice Department in March to settle the charges and agreed to pay a $50 million fine. It also agreed to invest another $50 million to accelerate the development of its next-generation night vision system and implement stricter training and policy measures to help close any gaps in its compliance programs.Gaffney said the biggest challenge for ITT and its defense clients in 2007 and beyond is finding a way to maintain the current high operations tempo while facing severe budget constraints. ITT's approach to the problem is to find ways to evolutionize rather than revolutionize its installed product base, he said. For example, the company is working hard to ensure that its 300,000 Sincgars radios in the field are being upgraded to meet the needs of the warfighters."We're leveraging and evolving that installed base to give the warfighter more and more technology so they don't have to recapitalize everything," Gaffney said. "And the beauty is that we're able to do that over time to meet the changing requirements of the customer, and that's us doing our part to help offset some of those budget pressures."