Top 100: What's behind CACI's product play

Acquisitions have fueled CACI International push toward products but the company sees the shift as a complement to its services work.

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For as much as CACI International talks up products as a growing aspect of its business going forward, the company is also careful to note that does not mean market observers should expect them to be the kind of manufacturer larger primes are.

But CACI is certainly less of the pure-play services contractor that it was six years ago when Ken Asbury joined as CEO.

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Asbury will say that CACI “has come an awful long way” toward being more of the technology-oriented business with a service element that he has envisioned for the company over his tenure. Three big-ticket acquisitions in particular have helped steer CACI in that direction: Six3 Systems in 2013, and the twin deals earlier this year for LGS Innovations and Mastodon Design.

Arlington, Virginia-based CACI is ranked No. 10 on the Washington Technology 2019 Top 100 with $2.8 billion in fiscal 2018 prime contract obligations.

The company’s acquisitions have pushed its overall revenue past the $5 billion threshold. The Top 100 rankings do not count subcontracting work or intelligence work so the Top 100 number is always lower than a company’s overall revenue.

In addition to integrating its recent acquisitions LGS and Mastodon, the company also starting a leadership transition as Chief Operating Officer John Mengucci gets ready to succeed the retiring Asbury as CEO on July 1. This Top 100 interview with was conducted in the week prior to CACI’s June 4 announcement of that transition, but we discussed leadership development and succession planning.

Top LGS executives such as its CEO Kevin Kelly and leaders from Mastodon transitioned to CACI, moves which Asbury sees as helping deepen the buyer’s talent pool.

“I’m wanting to make sure that I can represent to the board that if I get hit by a truck someday, they have ‘ready now’ people both inside and folks that are on the outside,” Asbury said.

That is a nod to the backgrounds of both Asbury and Mengucci at Lockheed Martin, which has an extensive talent development and succession function in its executive ranks.

“It is not my responsibility to select my successor, that is really the board of directors’ responsibility. But it is clearly my job, and I take it very seriously, to make sure that the board knows this is what I’m thinking about,” heAsbury said.“That’s what you have to do in an organization that is growing as fast as we are.” 

Back to the business now. Rather than hardware, CACI’s approach to products focuses on those in the digital realm with an eye toward a “software-defined everything” environment amid the government-wide push for more speed and agility, as Asbury put it both to me and in a May 3 earnings call with investors.

“We see a future of upgrading ships, airplanes and combat vehicles where a single device, piece of hardware then gets continually enhanced by software,” Asbury said. “Most of these things are going to run on some kind of a radio receiver (or) transceiver kind of thing.We want all the software that goes onto those devices to be open source, readily upgradable, highly secure and continually upgraded.”

Asbury’s description of what that software-defined future means and how it plays out sounds very similar to the smartphone devices so many of us carry in our pockets each day. He sees the same technological advances in processors that have made phones and tablet computers what they are today -- plus the networks those devices connect to -- as making their way to the mission as well.

The amount of battery power we can give these people now, it drives everything closer to the tactical edge,” Asbury said. “You’re starting to get to the point where you can have software-defined networks based on any capability out there, and you can make secure networks out of software that can reside on any number of pieces of hardware.”

How that software-defined concept applies to large hardware such as ships and airplanes also factors in how many different pieces of equipment have been integrated on them over the years. Giving those platforms new connections or capabilities often requires long-cycled work that often is highly specialized.

“It’s just a different take on it. Before you had to have the black box in order to have the capability, now it doesn’t matter: it’s the Internet of Things,” Asbury said. “Use any device out there capable of using your software, make your software generic enough that it works with a variety of processors. And it is the totality of that capability that gives you incredible agility and the ability to on a moment’s notice to put a network in place where you didn’t have anything before.”

How do the LGS and Mastodon acquisitions take CACI further down on its path of creating that future? LGS adds significant spectrum and network infrastructure businesses with defense and intelligence agencies -- one that draws on LGS’ roots as part of Bell Labs.

CACI does not talk much about what Mastodon does except the basics: rapid design and manufacturing of rugged products for signals intelligence, electronic warfare and cyber operations.

Asbury said that “fundamentally, the integrations are done” for both companies and they are all now on CACI’s back office and other business systems.

“The thing that we’re working on the hardest now is, how does this one, plus one, plus one equal something from a revenue generation point of view that’s greater than three,” he said. “The things we can go and pursue now become a much stronger revenue synergy story over the next couple of years.”

If his outlook for CACI has a bullish tone to it, then what about his perspective on the industry as a whole and what he sees in the future?

“Frankly all the signs are pretty good,” Asbury said, including those for another two-year budget agreement in the fall and what the Defense Department’s future funding picture will look like.

DOD has asked for a $750 billion budget that many publications have reported could end up being closer to $730 billion, which Asbury said, “is not a bad range at which potentially (the) House and Senate compromise on.”

“We shall see… but the indicators are very, very positive,” Asbury said. An adjustment to the Budget Control Act spending caps with a two-year deal could equal “even more accelerated growth for the entire industry,” he added.

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