SAIC Win Broadens Services Scope

Broadens Services Scope

By Nick Wakeman
Staff Writer

The General Services Administration's Seat Management contract is the missing link in Science Applications International Corp.'s strategy to tighten its information technology grip in the federal government, company executives said.

"Seat was a must win for us," said Robert Cann, group senior vice president of customer solutions and services for SAIC. "It is going to allow us to deliver on our vision."

The San Diego-based company's vision for the federal market is to manage all information to and from the desktop, whether it is voice, video or data services. And the multiple-award Seat Management contract made by GSA in July, coupled with the Technical Management and Support Services telecommunications contract that SAIC and others snagged from GSA last September, are keys to unlocking sizable riches in that market.

While each effort has eight winners, SAIC and DynCorp. of Reston, Va., were the only companies to win bragging rights to both. Seat is a governmentwide contract under which agencies can outsource desktop services potentially worth $10 billion over nine years. TMS is valued at $3 billion over five years.

Together, the contracts will allow agencies to streamline and outsource their data and communications networks, Cann said.

"There is a strong business case for dramatically optimizing your infrastructure. Commercial customers are doing that every day, and some of the agencies are going to do that, too," he said.

But marketing the SAIC vision may well be Cann's biggest challenge. Many agencies will not make the connection between Seat Management and TMS, he said, and that's what the company will have to educate the customers about.

The GSA contracts join other large indefinite delivery, indefinite quantity contracts in the stable of the Falls Church, Va.-based SAIC unit. Others are the Department of Defense's Medical Information System/System Integration, Design, Development, Operation and Maintenance System II contract, worth about $1.3 billion over five years; and the National Institutes of Health's Chief Information Officers Solutions and Partners contract, worth more than $100 million over five years.

While Cann would not break out revenue figures for his group, he predicted its commercial and government work would grow 30 percent or more a year for the next several years. During the next two years, Cann said, his 1,150 employee group should grow by 450 people.

The unit's business mix is about 75 percent government and 25 percent commercial. Commercial work is growing faster, at about 50 percent a year, compared to 12 percent for government, he said. In a few years, the unit likely will have a 50-50 government-commercial split.

Overall, SAIC had $3 billion in revenue in its fiscal year 1998, up from $2.4 billion a year earlier. With the acquisition of Bellcore, the employee-owned company expects revenue of more than $4 billion in the coming year, with a 50-50 split between government and commercial work.

Roger Simak, vice president and program manager of SAIC's Customer Solutions and Services unit, said the Seat Management and TMS wins give the division the opportunity to go after more civilian government business.

Agencies will use the TMS telecommunications services contract to transition from the FTS 2000 contract, held by AT&T and Sprint, to FTS 2001. FTS 2001 contracts, for domestic long-distance and international long-distance voice and data services, are planned for award in October. Bidders include AT&T, Sprint and MCI.

"We are more recognized as serving the Department of Defense," he said. "We haven't been a broad-based civilian agency provider in the past."

Linking the two contracts is a good selling and marketing technique, said Ellen Zidar, a Potomac, Md.-based analyst with the Gartner Group. "Being a prime on a couple well-publicized, large IDIQ contracts is a plus for them," she said.

"It's very bright to have the planning in place and go after the government market with a broader offering like that," said Terry Kelly of Terry Kelly Associates, a government sales consulting firm in Great Falls, Va.

But while SAIC's task of educating customers is important, especially with IDIQ contracts, there is the danger of educating them too much; then the agencies go out and buy services from someone else, she said. "Sometimes you are walking a tightrope."

Simak said part of SAIC's marketing will focus on explaining that TMS is not just a contract for transition from FTS 2000 to FTS 2001. There is a misconception that TMS covers only transition support, he said, but it really offers a broad range of telecom support services that continue after agencies go with FTS 2001.

The success of the Seat Management and TMS contracts will be built on the early adopters of the contracts, Cann said.

"There is no question we have the solutions set. Now it is about getting out and marketing and selling our services," he said. "Once you get some success stories, other people will follow."

In that vein, the acquisition of Bellcore last November gives SAIC instant heft in the telecom market. Said Cann: "It balances our credibility on the systems and applications side with credibility on the telecom side."

Roger Simak of SAIC
Zidar said another plus for SAIC is its experience with outsourcing of desktop services in the private sector.

"The government likes to see commercial experience," she said.

While TMS will find a ready-made market because FTS 2000 is running out, Seat Management is a completely new contract, and how well it will do is a big unknown, said Michael Groneck, director of research for Input, a research firm in Vienna, Va.

Brian Haney, an Input analyst, said: "Seat Management is a prototype contract, so a lot of agencies have a wait-and-see attitude. There is no guaranteed business."

Companies that spent a lot of money bidding on Seat Management now must spend even more to bid on task orders, Haney said. "It's not the most attractive scenario," he said.

And while there have been some bad experiences among agencies that hired contractors to operate desktop services in the past, most of those problems stemmed from a portion of work that the government did not outsource, and hence the contractor could not control, Zidar said.

But Cann noted the government is facing pressures from a reduced work force and tighter budgets, making contracts like Seat Management and TMS attractive.

"The government has to look at new and different ways of doing business," he said.

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