TOP 100: NCI sees end to revenue headwinds

NCI Information Systems has been pushing an AI-rich strategy has it works through several LPTA contracts that have dampened its growth but now it sees positive signs ahead.

In many ways, NCI Information Systems push to be a leading artificial intelligence provider has had mixed results but there are no regrets.

CEO Paul Dillahay told me the growth of that business hasn’t come at the pace the company expected when it launched a focused AI initiative in 2018 with the first of three exclusive partnerships.

“We’ve been a little disappointed, quite honestly, in the pace of adoption,” he said. “But we wouldn’t redo the decision to partner with those companies or anything like that. We’re very pleased with how that’s going.”

The company is ranked No. 83 on the 2020 Washington Technology Top 100 with $268.2 million in prime contracts.

The company has a three-pronged strategy to drive growth, Dillahay said, and there are signs the strategy will pay off.

“We are still committed to our core legacy business and we’re doing well there,” he said of the NCI’s mission solutions business. During our interview, Dillahay said the company is on the cusp of a major award in this segment of the business.

“Our focus on AI has taken us on two different paths,” he said of the second and third prongs.

One is what he calls AI-enabled offerings, which is pursuing traditional work but with a digital workforce element, instead of just a human workforce.

A good example of this kind of work was the $269.9 million contract to provide IT support to DISA’s Joint Service Provider. It’s the biggest NCI contract win in 10 years. NCI will be using AI tools to help manage the Defense Department’s IT infrastructure.

“That is what we call an AI-enabled bid,” Dillahay said.

Another area of success is the partnerships that NCI has formed with larger primes as a subcontractor because of its AI capabilities.

“We are partnering with companies that historically would never consider NCI because we weren’t bringing anything to the table,” he said

For example, NCI is on one of the teams pursuing the Army’s Enterprise IT as a Service contract. Currently, Verizon, Microsoft and AT&T are conducting pilots under an Other Transaction Authority contract. Dillahay wouldn’t reveal which company they are partnered with.

“We’re playing a big role in helping to make them successful and hopefully get down selected to the lead company,” he said.

NCI is partnering with other companies to help make their offerings more innovative. “We’re excited about that,” Dillahay said.

The third leg of the strategy is pursuing more pure AI work. In the beginning there were few pure AI opportunities but that is slowly changing.

“We’re seeing more RFPs and we’re spending a lot of time with our customers getting AI onto contracts and we’re doing proofs of concepts to grow the business,” he said.

The company’s investments in AI over the last two years have come as the company has faced headwinds because of several large lowest price, technically acceptable contracts it had in its portfolio. The company aggressively priced those contracts and then struggled to perform, Dillahay said.

“When they came for recompete, you pay the price for that performance gap,” he said.

But because of the investments in new technologies and developing new solutions, the company has been able to offset some of the lost revenue or at least lessen the blow. Now the end is in sight.

“We are at the tail-end of those headwinds and we are really looking to accelerate,” he said.

He can point to 2019’s 1.6 times and 2020’s nearly 2 times book to bill ratios as signs the company has turned the corner. “I think we’ve done the right things,” he said.

 “We’re bidding a high volume, our win rates are strong, but the timing of those wins has been impacted [by the COVID-19 pandemic], which is disappointing,” Dillahay said. “But from a new business growth perspective, we’re doing well.”

The COVID-19 pandemic has delayed customer decisions and changed how NCI pursues new business, particularly in responding to proposals.

“Traditionally it is a very collaborative, team environment when you are working a proposal,” Dillahay said. “We have space in our offices to effectively social distance and work together but it’s just not optimal.”

That’s an issue industry wide, Dillahay said.

NCI has been rotating leadership and personnel in and out of the office. There also is much less travel. “We’ve moved to a hybrid model,” he said.

But Dillahay hopes for a return to something more normal eventually. “The team’s done a great job performing in a difficult environment but I wouldn’t want to do this for three, four or five years,” he said.

And while tools like Microsoft TEAMS and Zoom are great and the company is using new ways to communicate, it doesn’t replace “getting a cup of coffee and having a conversation with somebody and getting to know them better as a person as opposed to scheduling a half hour Zoom meeting to try to do that,” Dillahay said.

A definite positive coming from COVID has been the increased use of a digital workforce solutions. “We were moving in that direction regardless of COVID, but the pace has been impacted,” he said.

Government customers have seen the benefit of a digital workforce supplementing the human workforce. “I think that’s great for NCI,” he said.