Sybase Plays the Field

Sybase Plays the Field

By Nick Wakeman

Sybase Inc.'s Public Sector Group is prowling for integrator partners that can boost the software company's backlog of government projects and prop up its sagging bottom line.

Executives at the company's Bethesda, Md.-based public sector unit want to forge new integrator alliances to bolster business in three areas: data warehousing, mobile computing and the Internet.

Strong relationships with American Management Systems Inc. of Fairfax, Va., and Lockheed Martin Corp. of Bethesda, Md., will serve as the model, said Marsha Thompson, vice president of the public sector unit.

"Those are our premier partnerships right now," said Thompson, who needs partners that can address agency business problems as she segments her unit's markets around the Department of Defense, intelligence agencies, civilian agencies and state and local governments.

Thompson joined the public sector group in January from rival Oracle Corp. of Redwood Shores, Calif. Her section at Sybase provides desktop-to-enterprise data solutions to federal, state and local governments and higher education institutions

By drilling deeper into core government markets and boosting integrator partnerships, the public sector group can lead Sybase's North American growth, said Thompson.

But that won't be an easy feat. Sybase's North American revenues (United States, Canada and Mexico) slid 7 percent in 1997 to $571.5 million, according to a March 31 company financial filing with the Securities and Exchange Commission. Overall revenues fell from $1 billion in 1996 to $900 million in 1997. More than 90 percent of Sybase's revenues are from the commercial market.

The company's stock was trading this week at $8.44 a share, slightly above its low mark during the 52-week period where prices have ranged from $6 to $23 per share.

Thompson would not break out Sybase's government revenues, but analysts placed them at under 10 percent of overall revenues. Thompson also would not disclose growth projections for her unit, but she and analysts agreed that state and local government business is a ripe area.

The state and local market might give Thompson's unit its best shot yet at strong growth, especially in data warehousing, said Lesley Kao, an analyst with research firm GR2 Inc. of Mountain View, Calif.

Kao said the state and local government data warehousing market, which stood at about $350 million in 1997, is expected to grow by more than 20 percent annually.

"One thing we have found is that there is no real market leader, so the space is wide open," Kao said.

Sybase's offerings in this market include online transaction processing, data warehousing and electronic commerce.

The state of North Carolina is relying on Sybase to help it analyze data and identify health care funds owed to them by the federal government. In Colorado, the company built what it bills as the nation's first statewide integrated criminal justice system.

It's too early to tell whether a more focused push into government markets will help lift Sybase as a whole, said James Pickrel, an analyst with Hambrecht & Quist,a financial services company in San Francisco.

"It is a wait-and-see situation," Pickrel said of Sybase's new strategies. "But they do have a some loyal [government] customers."

In its most recent financial filing with the Securities and Exchange Commission, Sybase blamed its 1997 financial woes partly on a shift in customer spending from strategic enterprise applications toward year 2000 compliance.

It also cited poor economic conditions in the Asia Pacific region and improper accounting procedures by a Japanese subsidiary that caused Sybase to lower 1997 revenues by $43 million.

In its filing, the company said it continued to maintain its core customer base in many markets. Among them are "68 of the top 100 banks, all 20 of the leading life insurance companies, 300 worldwide health care organizations and the top 25 telecommunications companies worldwide," the company said.

Thompson said she is looking at where agency problems intersect with Sybase technologies within each of her target markets.

For example, Pentagon officials are constantly deploying missions, so it is important for them to have the ability to access source and reference data irrespective of where they are. And troops in the field using laptops or handheld computers need to be able to connect to networks remotely, she said.

"They have to keep their information technology strategy in sync with their business strategy," she said.

Sybase likes the state and local market because products it has sold on the commercial and federal level fit the needs of state and local governments, Thompson said.

"We want our products to run across all markets Sybase is attacking because we want to ensure we have our greatest return on investment," she said.

State and local governments are looking to Web-based computing because the Internet can give them an instant infrastructure, Thompson said. Welfare reform initiatives also make it necessary for local agencies to be able to connect to statewide networks, she said.

"The demand is there," G2R's Kao said. State and local governments are turning to data warehousing and other new technologies to increase their efficiency, she said.

There is also more demand to share data among various agencies, especially departments handling human services and financial administration, Kao said.

While Pickrel did not doubt that Sybase had the right products for its chosen markets, products often are not enough, he said.

"It is going to take a balance of the right strategy, execution and products," he said.

Thompson said she will know if she has struck the right balance if one year from now her group has a backlog of projects with key integrators, division profitability is up and if the public sector group is a growth leader. "I think that is a fair expectation for us."

Partnerships with systems integrators will play a critical role in Sybase's success, she said.

With AMS, Sybase deployed the Defense Department's Standard Procurement System, a $235 million project AMS won in April 1997 to automate and streamline the department's procurement system. With Lockheed Martin, Sybase worked on the Global Transportation Network, a $130 million project to track military equipment and personnel.