Pomata Prepares PRC For New Markets

Pomata Prepares PRC For New Markets

Len Pomata

By Nick Wakeman, Staff Writer

With a trio of high-profile seat management and outsourcing wins since September, Litton-PRC Inc. is positioning itself to snare even more major federal business while expanding its reach into state and local and international markets.

The systems integration and information technology services provider, which had about $1 billion in 1998 revenue, sees acquisitions as a key ingredient to pursue these markets and remain a tier-one systems integrator, its top executive said.

"You need to be known by your customers as having a very high competency level in certain areas and have enough bulk to perform," Len Pomata, president of McLean, Va.-based PRC, said in an interview with Washington Technology.

Seat management, outsourcing, health care systems and public safety are areas in which PRC plans to be a market leader, said Pomata, whose company's revenue growth exceeded 12 percent last year.

Pomata said his acquisition strategy is keyed to these vertical markets, assessing customers needs and analyzing the company's internal capabilities.

Acquisitions also will play a role in building a presence in both the state and local and international markets, Pomata said.

Acquisitions are a quick way to build new customer relationships, said Peter Aseritis, an analyst with Credit Suisse First Boston in New York.

"It's a people business," he said. "So when it's a market where you've never been successful before, it's easier to buy people who know people than to start from scratch."

Size is not usually an issue in acquisitions, said Pomata, who doesn't expect to do any deals under $20 million. Anything that small would not be worth the effort to integrate, said Pomata, who would not comment on whether Boeing's Information Services unit or GTE Government Systems are acquisition targets. Both are now for sale.

"They have to do acquisitions if they want to broaden their base," said Byron Callan, an analyst with Merrill Lynch Global Securities in New York. PRC has a strong Defense Department business, but acquisitions can help it get new customers in federal, civilian and state and local markets, Callan said.

The company's customer mix is about 85 percent federal and about 15 percent state and local, Pomata said. The federal business split is about 60 percent defense and 40 percent civilian customers.

While all levels of government are now following the lead of commercial organizations in outsourcing more non-mission critical functions, the government is just chipping at the tip of the iceberg, said Pomata. Today, the government only outsources about 10 percent of its functions, he said.

"Our sense is that in five to eight years, the government will be outsourcing 90 percent of what it can," he said.

To prepare for a fast-growing market like that, PRC must do acquisitions, said Pomata, who recently plucked John Thomas Flynn, former chief information officer with the state of California, to serve as vice president of PRC's state and local business group.

Flynn, who will help expand PRC's state and local business to include more seat management contracts, said the outsourcing market will be driven by personnel shortages and state governments' realization that IT is not a core function.

PRC's success in winning the first GSA Seat Management task order will help the company win state and local seat management contracts, company officials said.

Another area PRC wants to expand is the international arena, Pomata said. The company formed Litton-PRC UK Ltd., a London-based subsidiary, to build itself a European presence.

PRC is looking for opportunities in the United Kingdom and Europe in areas such as criminal justice systems, fingerprint identification, computer aided dispatch and weather systems. Pomata said the international market could represent 10 percent of PRC's revenues in five years, up from a miniscule amount today.

On the federal side, PRC won in December 1998 the first task order under both the General Services Administration's Seat Management contract and NASA's Sounding Rocket Program. The seat management award is potentially worth $600 million over 10 years; the NASA contract could reach $572 million over 10 years. Both are major outsourcing contracts.

PRC's third key win was a task order to build a patient record system for the Defense Supply Services. While the value of the task order, announced in September 1998, is relatively small ? $20 million ? the win gives PRC a leg up for follow-on task orders as the system expands to include other defense and civilian agencies.

This particular task order was also a first and was awarded under the Defense Medical Information Systems/Systems Integration, Design, Development, Operations & Maintenance II (D/SIDDOMS II) contract. The multiple award, indefinite delivery, indefinite quantity contract given in April 1998 is worth about $2.5 billion over 10 years to the seven winners.

"They've booked some nice new business," said Aseritis.

An early win under the D/SIDDOMS II contract was especially important to PRC because health care information systems is a vital vertical market, Pomata said. Others include logistics, weather information systems and public safety.

The NASA contract also was a big win because it's an early step by the government toward more outsourcing of business processes and not just IT support, Pomata said.

As part of that contract, PRC will be performing mission operations at NASA's Wallops Island, Va., facility. Plans call for some government workers to actually become employees of PRC.

"One reason we were happy that we were successful is that it's at least a flavor of where the government is now with business process outsourcing," Pomata said.

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