Anexsys defies the odds

Bucking bad economy, company looks to cash in on federal experience

Anexsys LLC


Headquarters: Chicago
President: Stanley Dietzel
2001 revenue: $90 million
Federal revenue: $72 million
State and local revenue: $18 million
2000 revenue: $89 million
Web site: www.anexsys.com
Employees: 275
Lines of business: E-government services, integration and e-enterprise solutions. The company's e-government services include Web sites, interactive voice response applications and customer care services.
Federal customers: Army and Air Force Exchange Service and departments of Education, Health and Human Services and Treasury.
State customers: Kentucky Department of Fish and Wildlife, Idaho Department of Health and Welfare, Wisconsin Department of Workforce Development, Massachusetts Office of the Comptroller.

"If you're going to trust a major part of your e-government to a company, then you want someone who has done it before ... and worked through the issue of scalability." | Patricia O'Donnell, Anexsys' vice president of sales and marketing

Anexsys LLC started seven years ago to process tax payments and gradually expanded its e-government services to federal agencies. Now the Chicago-based company stands poised to compete against more established integrators for e-services projects in the state and local market.

Anexsys survived a market shakeout that saw a number of e-government dot-coms, such as New York-based govWorks Inc. and Chicago-based Netgov.com, carved up and sold off in pieces. Along with EzGov Inc., National Information Consortium Inc. and a handful of others, Anexsys defied the odds and managed to retain customers while even adding new ones.

The key to Anexsys' survival is no surprise given its origins. Anexsys started as a joint venture in 1995 by Bank One Corp. of Chicago and U.S. Bancorp of Minneapolis to implement the electronic federal tax payment system for the northern half of the United States.

Anexsys served as the prime contractor on the project, providing systems integration, funds movement and customer service. Other companies serving as subcontractors were AT&T Corp. of New York, IBM Corp. of Armonk, N.Y., and NCS Pearson Inc. of Eden Prairie, Minn.

From that contract, Anexsys has expanded into a full-service e-government business with 2001 revenue of $90 million, of which $72 million came from the federal government and $18 million from state governments, company officials said.

The privately held company now offers a comprehensive set of e-government and customer relationship management solutions, including integrated Web sites, interactive voice response and call centers for tax and revenue, health and human services, and parks and recreation.

Anexsys President Stanley Dietzel wants to double the company's revenue over the next five years to about $180 million. The company hopes to achieve this goal by significantly expanding its business with state and local governments, said Patricia O'Donnell, Anexsys' vice president of sales and marketing.

The e-government market was a hot opportunity in the state and local sector up until 18 to 24 months ago. It then cooled significantly for many companies when the economic decline brought about a similar decline in public-sector revenue.

Anexsys, however, did not feel the squeeze. "I've not seen any dramatic reduction in e-government initiatives," O'Donnell told Washington Technology.

The company's growth strategy for state and local is to offer e-gov applications that have a significant level of productlike functionality, yet allow customization to meet the unique needs of state and local government customers, she said.

"We believe this approach will best serve the needs of entities and afford us the opportunity to implement solutions faster and more efficiently," she said.

For example, Anexsys call center operations, which the company refers to as customer care solutions, work from an infrastructure that can be tailored to meet the needs of different agencies by closely scripting the interactions between the operators and citizens, O'Donnell said.

In the state and local market, Anexsys prefers to serve as the prime contractor on projects, while in the federal market it generally prefers to team with integrators, O'Donnell said.

For example, Anexsys is a subcontractor to San Diego-based Titan Systems Corp. on the National Institutes of Health Chief Information Officer Solutions and Partners II contract, known as CIO-SP2.

In 2001, Anexsys processed 30 million Internet transactions, handled more than 14 million interactive voice response calls and transmitted $750 billion in electronic payments for government, O'Donnell said.

"What sets us apart is the depth of our expertise," she said. "If you're going to trust a major part of your e-government to a company, then you want someone who has done it before ... and worked through the issue of scalability."

The financial support behind Anexsys gives it an edge over many small companies trying to expand in the state and local market.

"There's plenty of money backing up Anexsys with Bank One," said John Goggin, vice president for electronic government strategic service at the market research firm Meta Group Inc., Stamford, Conn.

To succeed in the state and local market, Anexsys should try to expand its business within a state by deploying electronic payment in one agency and then expanding it to other agencies, Goggin said.

Rishi Sood, principal analyst with the market research firm Gartner Dataquest of Stamford, Conn., said Anexsys lacks long-term relationships with customers, a problem for any young company that wants to do business in the government IT market.

In addition to building long-term relationships, Anexsys needs to diversify its revenue streams by expanding its federal business beyond the Treasury Department and by winning deals in large states such as California, New York and Texas, he said.

"This will define whether they [eventually] will be in the top tier of state and local vendors," he said.

Staff Writer William Welsh can be reached at wwelsh@postnewsweektech.com.

About the Author

William Welsh is a freelance writer covering IT and defense technology.

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