Booz Allen banks on agility and independence

Booz Allen Hamilton Inc. spins off its commercial business so it can concentrate on opportunities as a trusted broker in the government market.

The year 2008 brought momentous change to the nation and to 94-year-old Booz Allen Hamilton Inc. In July, the company spun off its commercial management consulting business, now called Booz and Co., and Booz Allen Hamilton became focused exclusively on government consulting.

The split restored Booz Allen to its core government work and resolved an internal identity crisis with its commercial unit.

“This deal has truly liberated the two Booz units so that they can establish their own identities and pursue opportunities that match their respective goals,” said Brian Lustig, co-founder of Lustig Communications, of Rockville, Md., which has clients in the information technology and government services markets.

“Booz Allen has shown the ability to evolve and adapt to meet the dynamic needs of its clients,” he said.

Almost one year later, Booz Allen and other professional services federal contractors are adapting to unprecedented economic conditions and a changed political climate.

The Booz Allen leadership is banking on agility and independence as much as on its elite history among the top tier of advisers to the nation’s senior officials. The company has developed new areas of concentration, including cybersecurity, while maintaining its core business in defense and intelligence work.

“We are very optimistic about the future,” said Joseph Garner, senior vice president and head of Booz Allen Hamilton’s defense line of business. “We tend to fare better sometimes in a compressing market.”

Booz Allen has annual sales in the $4 billion range, with defense work representing about half of that total. Intelligence and civilian agency business makes up the rest. The Carlyle Group bought a $2.5 billion stake in the firm in July 2008 that enabled the company to buy out the partners on the commercial side so they could spin out that business.

With competitors including Science Applications International Corp. and Computer Sciences Corp., in addition to the IT units of Boeing Co., Lockheed Martin Corp. and Northrop Grumman Corp., Booz Allen remains focused on consulting.

“Booz Allen has tried to position itself as an honest broker," Garner said. "We are not encumbered…[as are] the hardware companies. That gives us a bit of an edge.”

The company has been deeply involved in supporting the Defense Department’s base realignment and closure efforts and IT infrastructure modernization, and it created a new business campaign in cybersecurity 18 months ago.

“We crystal-balled it and saw that demand for cybersecurity was going to be very large,” Garner said. “It is a great complement to our information assurance, information operations and enterprise resiliency businesses.”

While the economy has floundered, Congress has funneled billions in rescue funds to banks and insurers, and President Barack Obama pushed through a $787 billion general economic stimulus package.

At the same time, the demand for government support services has been relatively stable as agencies are challenged to deliver services effectively, on budget and with greater transparency.

“The government is dealing with organizational change, changing IT systems and adjusting budgets,” Garner said. “We are continuing to evolve. We have all sharpened our game to become more competitive.”

One of Booz Allen’s hallmarks is its internal matrix structure. In addition to the three vertical core businesses — defense, security/intelligence and civilian — there are horizontal domains, including IT, organization and strategy.

“The matrix model allows us to be agile in the market,” Garner explained. “We build our capability in the horizontal domains, and we can operate at the intersections.”

For Booz Allen’s 21,000 employees working with government agencies such as the National Security Agency, DOD, the Homeland Security Department and Health and Human Services Department, a key to success is attracting top talent. But that has become more difficult because of the cumbersome process for obtaining security clearances, Garner said.

“The war for talent is the highest challenge as an industry player,” he added.

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