With its acquisition of General Dynamics call center business, Maximus is on a transformation path to raise its profile and position for larger contracts.
Acquisitions that work out usually do one of two things. The deal either builds on a company’s current contracts, customers and capabilities or has the power to transform the buyer.
And when the buyer is lucky, the transaction can do both. We should count Maximus and its $400 million acquisition late last year of the General Dynamics IT call center business as one of the lucky ones.
That deal brought about $800 million in new revenue to Maximus’ federal business, vaulting the company from No. 72 on the 2018 Top 100 rankings to No. 25 on the 2019 list.
So you can check the box on scale, but Maximus views the power of the deal as about much more than size.
“With the acquisition we became the pre-eminent citizen engagement center provider in the federal government,” said Thomas Romeo, general manager of Maximus’ federal services business.
The acquisition gave Maximus a $430 million Census Bureau contract for contact center support that it competed for but lost to GDIT. Maximus also picked up a $263.5 million Federal Emergency Management Agency contract for a Hurricane Florence recovery call center.
In addition to the work, Maximus also picked up a telephony platform known as "Genesis" for call centers that is cloud-based and FedRAMP-certified.
With its added scale, the federal business now represents about one-third of Maximus' overall revenue. The other two-thirds are covered by the company’s international work in countries such as the U.K., Canada, Australia and Saudi Arabia and health and human services work it does for state and local governments in the U.S.
The added scale also brings a need for transformation for Maximus.
“There is a difference between being an $80 million company and winning an $8 million deal versus being over $1 billion and what it takes to keep that engine running,” Romeo said.
So Romeo and his team are building the infrastructure they need to support a larger business.
“We’ve beefed up the sales team and the capture team. And we’ve brought in a lot more technical resources to support us on bids,” he said. “It’s like a builder and you want to build a new neighborhood. It’s great but are the roads there? Are the schools there to support it?”
As Maximus looks at future opportunities, Romeo said he sees the team pursuing larger contracts and being more strategic about the smaller ones.
“We know there are white space accounts where we want to gain a foothold,” he said. “You aren’t going to get a big deal right away. They need to get to know you.”
The company has been investing internally on artificial intelligence and robotic process automation capabilities and it’ll pursue smaller deals that can showcase those capabilities. “That gives us past performance (qualifications), so we’ll certainly go after them,” he said.
Romeo said he sees opportunities for the company growing as more customers adopt cloud computing and the "X-as-a-service" model, which agencies have struggled with.
“But now we see much more going in that direction,” Romeo said. “I think infrastructure support and internet inside the agencies will be bought as a service and as a business process outsourcing company that as a service model is right in our strike zone.”
That example Romeo used was an agency that needs to buy security services for a system. The agency wants to buy it on a fixed price, rather than going with a staff augmentation contract and managing it themselves.
“The offeror says, OK, this is what it costs for a large system and this is what it costs for a small system and here is what you get in return,” he said.
Thanks to its 2015 acquisition of Acentia, Maximus has the IT qualifications to bid that kind work along with the financial infrastructure to support an as a service model, Romeo said.
One differentiator for the company is that it has been applying digital technologies such as artificial intelligence, RPA, data analytics to its own business process outsourcing projects.
Maximus uses those technologies to help make the company more competitive. Let’s say for instance: the company wins a contract and it is fixed price per unit contract as it does for some of its Medicare appeals work.
“If I can automate some of that process, I can drive down costs and when the recompete comes up I can rebid at a lower rate, which makes me more competitive,” Romeo said.
A second benefit is that for a new customer, Maximus can bring them to a current project and show them the AI or RPA tools in action. “Whether they want to buy as a service or as traditional IT, we are in a great position,” he said.
Moving forward, Romeo said that Maximus will have a higher profile in the market. “We are playing in a different atmosphere. We have to compete with the big boys and we have to have the infrastructure to compete with them,” he said. “We used to sneak under the radar but we aren’t anymore.”
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