NC Weds

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N.C. Weds Databases, Produces Profits

By Dennis McCafferty

Staff Writer

When North Carolina officials linked health care databases statewide last year, they uncovered a bureaucratic mess. Cross-checking patient information among hospitals, local health departments and state offices, they found scores of inconsistent or missing Social Security and phone number identifications.

And it all led to a multimillion dollar windfall.

Better accountability enabled North Carolina officials to report a larger number of in-state Medicaid clients to Washington. The state boosted its annual federal revenue stream from $1.4 billion to $1.6 billion. That budget bonus provided a huge return on an investment of $1 million to hire Sybase Inc. to provide software and expertise for state database integration.

"The bottom line to the health department is that revenue is increased now by $200 million this year, next year and every year," said Jack Cain, director of the health and human services market for Sybase's government group in Bethesda, Md.

After bumpy times in the mid-1990s, Emeryville, Calif.-based Sybase is looking to get an edge on archrival Oracle Corp. by leaping into the state and local database integration market.

State and local governments are realizing the need for better database links throughout virtually all agencies. State prisons and local sheriff's offices, for example, can deal with crowding problems much more easily if they can access each other's inmate counts. And with more federal money now funneled to the states via block grants, there's great interest in making the best use of the dollars by sifting through relevant data with precision efficiency.

SYBASE INC.
Fourth Quarter Ended December 31
. 1996 1995
Sales ($ millions) 267.8 267.3
Net income ($ millions) 5.1 6.0
Earnings per share 0.07 0.08
Number of shares (thousands) 77,723 72,646
Fiscal Year Ended December 31
. 1996 1995
Sales ($ millions) 1,011.5 956.6
Net income ($ millions) (79.0) (19.5)
Earnings per share (1.05) (0.27)
Number of shares (thousands) 77,723 72,646

Enter Sybase. Its acquisition of MDI
and Powersoft in the mid-1990s secured the software and technical expertise needed for what Sybase calls its enterprise architecture
solutions. In essence, enterprise architecture allows a person at a computer to access
data from a myriad of sources, with the Sybase tools tracking the information down wherever it is and making the appropriate format translations so it makes sense to the person seeking it.

After the person retrieves the information, he or she can make changes and send it back to the database source in the right format. An estimated 30 states now use Sybase's enterprise architecture offerings.

"The only way we could do this before would be to write multiple programs," said Sybase customer Rajesh Virkar, who is chief of information technology for North Carolina's health statistics center. "The older technology doesn't allow you to do ad hoc inquiries. This way, you can slice and dice it any way possible."

Sybase launched its state and local government effort two years ago and the company's timing looks good. Total infotech industry spending last year in state and local governments was $34.5 billion, growing at only 5.5 percent, according to G2 Research Inc. in Mountain View, Calif. But the state and local systems integration market accounted for $7.45 billion of the total picture and grew at a rate of 16 percent.

States such as Georgia, Michigan and Texas are overhauling entire database systems involving welfare, Medicaid, transportation and justice, outsourcing integration work.

Industry leader Oracle Corp. has worked with state and local governments on these kinds of projects for about three years. Declining to cite specific figures, executive Ken Mellett said the efforts have gained hundreds of millions of dollars in revenue for Oracle, which is based in Redwood Shores, Calif.

"We believe it's going to continue to be a growth-oriented market segment, as funding moves from the federal sector to the states," said Mellett, area vice president for federal, civilian and state and local markets at Oracle's government division in Bethesda.

This is where Sybase wants to gain the upper hand. The company remains the No. 2 developer of database management systems software, behind Oracle. Recent Securities and Exchange Commission reports detail the companies' contrasting financial outlooks.

Oracle earned a net income of $603.3 million in its most recent financial year, with annual sales growing at a 42 percent clip.

Although the company started turning the corner at year's end, Sybase's most recent
annual portrait turned cloudy. The company
reported a net loss of $79 million during
the budget year ending Dec. 31. The loss included a $49.2 million restructuring charge, Sybase reported. Overall annual sales grew at just 5.7 percent, while stock losses fell further from 27 cents to $1.05 per share last year. As recently as 1994, Sybase stock earned $1.38 per share.

So, as the teacher writes in the report card, there's clearly room for improvement. After recent layoffs and the naming of Mitchell E. Kertzman as Sybase CEO, analyst Brian L. Eisenbarth said the company can rebound. State and local governments are a logical niche.

"All of the database integrators would love to pursue this market," said Eisenbarth of Collins & Co. in San Francisco. "The government has a wide employee base and a huge need for database tools. Obviously, the government needs to go in this direction and will turn to the best company who can help them do this."

Sybase's database integration efforts have broken much ground, noted Meghan Cotter, a senior analyst at G2 Research Inc. A model effort in Colorado, for example, decreased duplication and increased communications efficiency among criminal investigators, courtroom workers, and jail and prison officials.

"A lot of companies think they have the right integration system and have the right solution," Cotter said, "but Sybase is really the first to come up with a solution like this .... Integration of databases is one of the greatest areas of growth for states, especially with welfare reform. More and more state officials are saying they need to integrate these systems to help communicate."

Atlanta's preparations for the Olympics turned much attention to its staggering traffic problem. In addition to creating car pool express lanes, officials turned to Sybase in 1996 to help link the city's transportation databases.

This allowed information from highway cameras and traffic count coils in roadways to be fed to a traffic management center, which helped monitor the rate at which cars waiting at on-ramp traffic lights could be let on the interstate. Meanwhile, an electronic billboard linked to the database warned motorists on Interstates 75 and 85 if there was a delay ahead, so they could take an alternate route.

With Atlanta looking to reduce clean-air problems that have stalled the flow of federal highway dollars, the system helps by getting commuters to work more quickly.

"Instead of sitting in the middle of a traffic jam, you want them to move around the congested areas," said Bill Sullivan, director of Sybase's transportation, insurance, environment and lottery government markets. "It has a big environmental impact and it reduces accidents."


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