How Fast Is the Fastest?
Houston Associates parlays state and local roots and minority contracts to an astounding 11,383 percent growth rate
P> It's no coincidence that John R. Houston served for many years as the chief operating officer for the Whitney Houston organization: He's the singer's oldest sibling.
But Houston has established a separate identity as a first-class technologist, and as this year's fastest of the Fast 50, he has solidified that reputation. He founded Houston Associates Inc. in 1982 after working in the 1970s as a technology and management consultant.
By focusing on two high-growth areas -- communications and telecommunications -- the company has achieved an astounding 11,383 percent growth during the past five years. The privately held Silver Spring, Md., company has used the Small Business Administration's 8(a) set-aside program for minority businesses as a key factor in its growth. As such, the company follows in the path of two previous Fast 50 leaders: NCI Information Systems Inc. and Information Technology Solutions Inc.
But it has taken Houston more than a decade to reach the top of the Fast 50. The company didn't experience strong growth until the early 1990s when revenues began a steady rise: $171,000 in 1991, $702,500 in 1992, $5.3 million in 1993, $10.4 million in 1994 and an estimated $19.6 million last year. The company has offices in Arlington, Va., Georgia, Idaho, Kansas and Germany.
Houston Associates began by providing professional services for an area called organizational development. After initially focusing on management systems design and instructional technology to improve the planning, control and decision-making functions of municipal governments, Houston Associates started selling similar services to the federal government and commercial clients. Houston's undergraduate degree in psychology and his master's degree in organizational development from Antioch University in Yellow Springs, Ohio, were ideal preparation for that work.
Houston responded to the growing popularity of microcomputers and the needs of organizations to network their PCs. "In the late '80s, technology became the main part of our business, and [organizational development] took a back seat," he said.
After gaining 8(a) status in 1988, Houston Associates began expanding its federal government business in the early 1990s and found a niche -- providing high-performance networks to the Department of Defense. "The Department of Defense is ahead of the civilian world in the implementation of these technologies -- such as distributed applications," said Houston. "We want to develop or acquire a product base, which could involve software engineering or hardware" that will enable Houston Associates to win more civilian agency business.
The 180-employee company specializes in the engineering and re-engineering of bandwidth-intensive, multimedia networks. Houston Associates' applications work has included advanced distributed simulation, distributed collaborative planning, distance learning, video teleconferencing, command and control, network management and network security. The company operates a router-testing facility in its Virginia office. Houston Associates' suppliers include Bay Networks Inc., Billerica, Mass.; Motorola Inc., Schaumburg, Ill.; Silicon Graphics Inc. and Sun Microsystems Inc., both of Mountain View, Calif.
The company has worked for the Federal Emergency Management Agency, National Institutes of Health and the Department of Health and Human Services. Work with the federal government -- the lion's share of which is 8(a) -- accounts for 85 percent of the company's business.
But Houston does not think his firm will encounter great difficulty when it graduates from the 8(a) program in 1997. "We are serving a niche area, and not that many companies are handling" high-performance networks. "We will carry that expertise forward with us" after 8(a) graduation. However, Houston, the company's president and CEO, conceded that "it's difficult to enter other markets when the company has grown" so quickly through 8(a) federal government business.
Houston attributed part of his company's success to private sources foresighted enough to extend financing. He thinks that "banks are starting to get smarter" in understanding the needs of small, high-tech companies. Still, he said, they have been "missing the boat." Many banks try to employ strict debt-to-equity ratios in evaluating companies, he explained, but those formulas do not work well with a company growing as quickly as his.