Deloitte Jumps Back Into Federal Market
Deloitte Jumps Back Into Federal Market
By Nick Wakeman, Senior Editor
Deloitte Consulting wants back into the federal market.
After exiting the market in the late 1980s, Deloitte of New York is hoping to use partnerships with established players and skills it honed in the state and local and commercial markets to build a federal business from scratch.
Growing interest in electronic government and enterprise resource planning systems is what has drawn Deloitte's attention to the federal market, said Robert Campbell, senior partner and head of the consulting firm's federal practice.
"We see the federal market in the early stages of e-government, and our overall strategy is to transfer our commercial best practices in ERP and e-business to the emerging needs of the federal sector," he said.
Although the new practice launched in March, Campell's goal is to reach $20 million in business by the end of the year.
"Over time, the federal practice could approach our state and local revenue" of $200 million annually, he said.
At this stage, however, Campbell said his goal is not to build a practice with several thousand members as have competitors such as KPMG Consulting LLC of McLean, Va., and Andersen Consulting of Chicago.
Instead, he is building a senior leadership team that will then tap into the expertise Deloitte has in its commercial practices and its extensive state and local practice, Campbell said.
In the state and local market, Deloitte provides consulting services such as strategic planning, enterprise resource planning, business process re-engineering, revenue enhancement and operations and administrative practices improvement.
The types of agencies Deloitte has worked with cover areas such as health and human services, finance and administration, transportation, law and justice and public safety.
From the commercial side, Campbell said the federal practice will leverage the work the firm has done in industries such as aerospace and defense, health care, financial services and consumer business.
"In all of these, we think we have proven capabilities that we think are germane to current needs of the federal agencies," Campbell said.
Deloitte had $2.36 billion in 1999 revenue and is projecting $2.9 billion in 2000.
One of Deloitte's strengths in the state and local marketplace ? work with health and human services agencies ? likely will be the firm's best entree to the federal market, said Rishi Sood, a principal analyst with Dataquest, a research arm of the GartnerGroup Inc. of Stamford, Conn.
"Those [state] agencies have the tightest relationship back to the federal government," Sood said.
By the end of 2000, Deloitte will have 30 to 40 people working in the federal practice, and more will be added as the business grows. The firm is hiring people from the outside as well as shifting people internally, Campbell said.
Deloitte's strategy also includes forming alliances with software vendors, systems integrators and emerging electronic commerce companies, he said.
"We have been focusing on the major ERP package providers, given the reality that the federal government is still early in the first wave of ERP," Campbell said.
The federal practice will build off Deloitte's relationship with SAP America Inc. of Newtown Square, Pa., in the state and local market, he said. The two have worked together on projects in the state of Arkansas; Manitoba, Canada; the California Department of Water Resources; and the Florida Department of Revenue.
Deloitte also has a state and local alliance with Oracle Corp. of Redwood Shores, Calif., that Campbell said he hopes to mirror in the federal market.
With systems integrators, Deloitte is a subcontractor to Electronic Data Systems Corp. of Plano, Texas, on a Navy project worth $8 million to Deloitte. The company is working on other proposals with EDS and to IBM Corp. of Armonk, N.Y., Campbell said.
An alliance announced in late August with e-commerce company National Information Consortium Inc. of Overland Park, Kan., also will have a significant role in Deloitte's federal strategy, he said. The alliance combines NIC's e-government services with Deloitte's skills in helping organizations change the way they do business.
Other alliances for the federal market are in the works with Siebel Systems Inc. of San Mateo, Calif., Sun Microsystems Inc. of Palo Alto, Calif., and BroadVision Inc. of Redwood City, Calif.
Building alliances are important because agencies are using contracts that require a broad range of skills, Campbell said.
"The reality is that many of the agencies are looking to teams to be formed on these major proposals, and we and our alliance partners will perform better as part of a broader team," he said.
As Deloitte works its way into the federal market, it will face some of the same competitors it does in the state and local and commercial markets: the other Big Five accounting and consulting firms.
That Deloitte wants into this market is no surprise to officials with KPMG Consulting and Andersen Consulting, both of which have large federal practices.
"The federal market is important to us for the sheer volume and the profitability of the work," said Robin Lineberger, managing director of KPMG Consulting's civilian agency practice. "And contrary to popular belief, the government's adoption of technology is nearly at the same pace as the commercial sector."
KPMG Consulting does more than $400 million a year in federal revenue and has 1,500 people on staff. KPMG has major government projects, such as an Oracle Financial implementation across 170 Veterans Affairs hospitals.
What the government is starting to buy also plays to the strengths of consulting firms, Lineberger said. "Many organizations now are turning their attention to management systems," he said.
Andersen Consulting has a major government presence with about $200 million in annual revenue and between 1,500 and 2,000 staff members, said Stan Gutkowski, who manages the federal practice.
"If you look at the government market as a single client, it is the largest client you can have," he said. "Any significant player in the commercial market needs to be in the federal market also."
The business problems facing government customers are just as complex as commercial customers, but on a much larger scale, Gutkowski said.
Andersen has landed major government projects, such as modernizing the student loan system for the Education Department and modernizing systems for the Defense Logistics Agency.
"In each case, we are leveraging our commercial experience, but balancing that with our people with government experience," he said.
While it may be awhile before Deloitte can challenge the scale of the other consulting firms, Campbell said the message he is bringing to market is resonating.
He noted the high-level hires in Deloitte's new federal practice, such as Alan Ptak from Lockheed Martin Corp. of Bethesda, Md., who will be doing business development work. Another hire, John Cherbini, who headed IBM's global government consulting practice, is part of Deloitte's outsourcing unit but will be working closely with the federal unit.
"It has been easy to attract senior people," Campbell said, adding that he expects to hire two or three more senior-level people in the coming months.
"I think they see an opportunity to create something from nothing," he said. "Plus, we don't have any baggage, so we are starting with a clean slate."