Raytheon's Top 100 lesson: Know yourself

Raytheon is very clear on what they are, and just as importantly what they are not in the crowded government technology and professional services landscape.

First, there is what Raytheon’s services business is: a division tied closely to the larger corporation’s core portfolio of weapons and large platforms and a provider of complex, high-end technology integration work and support services.

Now for what Raytheon’s Intelligence, Information and Services segment is not: a one-stop shop with large scale for all types of services across the spectrum.

So don’t expect the blue chip, “Big Five” defense contractor to join the recent wave of scale-focused megadeals the likes of General Dynamics made in CSRA. But do expect Raytheon to stay the course on what it views as a two-fold advantage for itself: mission knowledge with a commercial focus on software and other solution development.

“We’re not trying to be all things to all customers,” said Dave Wajsgras, president of the Raytheon IIS business. “We’ve narrowed the areas we want to participate in and we now have core competencies in the markets that we lead in today.”

Raytheon climbed one spot to No. 4 for the 2018 Washington Technology Top 100 rankings on $5.8 billion in fiscal 2017 prime contracting dollars. Ninety-three percent of those came from defense agencies -- one indication of how tightly connected IIS is to the corporation’s defense platform businesses.

“We determined a while back that if we don’t have sustainable competitive differentiators or sustainable competitive advantage in a certain area, then I made a strategic decision to no longer invest in this area,” Wajsgras said. “That’s not where our future is. What we’re investing in today is substantial from an (research-and-development) standpoint… areas where we’ve concluded we have a sustainable competitive advantage.”

Those areas include cyber, command-and-control and a “sustainment through modernization” business that includes development of complex software and other upgrades to extend the life of legacy platforms. Also in there is a growing space pipeline company executives can only go so far to talk about.

But what executives called a “milestone win” last year for Raytheon IIS came from the civilian side of the house when it was finally confirmed in October 2017 as the winner of the $1.2 billion “Domino” cybersecurity services contract with the Department of Homeland Security.

It took three rounds of award attempts and subsequent protests by Northrop Grumman, then a Government Accountability Decision that backed DHS’ award decision to get there. But Raytheon is now at work in helping DHS implement a complex firewall to defend civilian networks and monitor traffic on them.

“In many ways, Domino as a program is the center of gravity to cyber secure the 100-plus ‘.gov’ agencies and additionally support the cybersecurity structure of the 16 critical infrastructure verticals,” Wajsgras said. “We’re working closely with the experts at (DHS) on expanding the security posture and over time as we are collectively successful in rolling out this improved posture, it’s going to benefit the U.S. government and commercial industry.”

Raytheon’s approach to the Domino project will include automation and analytics, both of which were cornerstones of the contractor’s run of 14 cyber-focused acquisitions during Wajsgras’ tenure as its corporate chief financial officer from 2006 to 2015.

That vast cyber portfolio also includes a burgeoning international component as well with ongoing projects in the United Arab Emirates and Saudi Arabia. Raytheon has done nation-scale cybersecurity work in the UAE not unlike Domino and signed a memorandum of understanding in March for defense cooperation in Saudi Arabia that includes cybersecurity.

Wajsgras semi-frequently travels to meet international customers and speak with government officials of those countries to discuss cyber and other matters. And as he tells it, those conversations are almost a carbon copy of those he has with U.S. government leaders.

“I’m being quite literal… there are no substantive differences,” Wajsgras said. “Different countries are at varying levels of maturity with respect to their cybersecurity posture but the threat environment is absolutely ubiquitous whether you’re talking to foreign intelligence agencies, foreign military services or foreign government agencies.

“They parallel the conversations that I have with the leadership of those same agencies and same services here in the United States,” he said.

On a total revenue basis, the Raytheon IIS segment held flat last calendar year at $6.2 billion and this year is going through a three-part recompete of its large “Warfighter Focus” contract for training services to the Army. The first $3.5 billion piece was awarded to Lockheed Martin in March and is currently under protest by Raytheon, while the two other parts are due for award later this year.

But Raytheon is laying a foundation for future growth in the IIS business. Bookings jumped from $5.5 billion in 2016 to $6.6 billion in 2017 buoyed in part by Domino.

Backlog climbed from $5.6 billion to $6.5 billion, and earlier this year Raytheon booked an almost $600 million task order to help upgrade Army missile defense and other strategic systems.

The company also bolstered partnerships with commercial technology outfits including those from Silicon Valley with an eye toward what emerging tools the military in particular will increase demand for.

Over the past six months, Raytheon has announced a collaboration with Pivotal focused on agile software development and another with Virsec to bring new computer network defense tools into the global public sector and critical infrastructure arena.

What makes a good commercial technology partner for Raytheon, according to Wajsgras? “Technologies and capabilities that we can use to improve our positioning in an existing program or an existing capability that we are already offering to our customers, or to better position us to expand in a particular market to win new business,” he said.

That also would position Raytheon as a leading integrator of those tools as the military’s demand in particular for commercial tools outside the traditional defense supplier base goes up.

“In the past, our government customers were more apprehensive toward bringing in purely commercial capabilities to the mission solution. Today they are essentially demanding it and because we’ve developed a culture of embracing commercial technologies, I believe that our position with these customers and more importantly end users is much stronger than most of our industry competitors.”