OTG Widens Government Focus
OTG Widens Government Focus
By Trish Williams
OTG Software of Bethesda, Md., has formed a new division to augment its federal, state and local government business.
The division's five employees last month joined the company's 71-person office in Bethesda. OTG's document management and mass storage products have been marketed chiefly to commercial customers through channel partners serving the financial services, insurance, manufacturing, health care, telecommunications and education markets.
The privately held company, which has grown at a rate of 100 percent annually for the past four years, initially tried to increase its federal government market share through the acquisition of 8(a) companies, company officials said.
The supplier of software solutions for the Windows and Windows NT platforms will continue to work with 8(a)s as it emphasizes alliances with systems integrators with strong agency ties to push its products across a broader spectrum of government users.
Richard Kay, OTG founder and CEO
"The government is only 15 minutes away, and we want to take advantage of what we believe is going to be a big growth area - storage management components required by these agencies," said Richard Kay, who founded the company in 1992 and currently serves as its president and chief executive.
Kay forecasts revenues of about $17 million for 1997; 1996 revenues were $10 million. Last year, 92 percent of the company's revenues came from commercial sales, 7 percent from international sales and 1 percent from government-related work, he said.
Plans call for OTG's government share to reach 10 percent in 1998 and 20 percent the following year, Kay said. By 2000, that percentage could swell to 30 percent to 35 percent, he said.
Douglas M. Schmidt, managing director at Baltimore-based Legg Mason, said OTG has "a great client list. Not only is the company's COLD computer on a laser disk product a big seller, but because OTG is so Microsoft-friendly, they are really positioned very well in the market," he said.
A key element of OTG's growth strategy is to team up with top systems integrators and support General Services Administration contracts as they come up, said Kay. Also, the company will continue to work with 8(a) companies with established links to the government.
Heading the government unit is David Stephens, who previously ran the government division for Pinnacle Micro of Colorado Springs, Colo.
According to Stephens, OTG recently helped the Federal Aviation Administration install an electronic document management system in Oklahoma City, Okla., under a subcontract with PRC of McLean, Va.
"We just delivered on that contract in the last 30 days," Stephens said. PRC was one of the first systems integrators to get involved with OTG's DiskExtender API toolkit, Stephens said.
According to Stephens, OTG's overall strategy will be to seek a systems integrator with an area of expertise. For example, "we'll want one specific for NASA, we don't want overlapping," he said. Meanwhile, there are 8(a) companies with expertise at various military base locations, so the company will look to establish a strategic approach there," he said.
In the past, document management system providers had a reputation for unreliable interfaces and overpromising on capability, according to Schmidt. Indeed, "a major figure in the community used to say that the quickest way to turn a good client into a bad client is to sell them a document management system," he said. That has changed rapidly, he said, "and that same unnamed figure is now selling them at a major integration company. So, if you have a good system, there is a definite need and OTG has a good system."
OTG, a division of Optical Technology Group Inc., based in Bethesda, also has been in discussions about the possibility of being acquired or of going to market with leading investment banks, including Friedman, Billings, Ramsey, based in Arlington, Va., Kay said.
OTG is a prime candidate for coming to market as "not only do we have substantial revenues but we have substantial profit," Kay said, adding that "it's a tough decision."
Besides FBR, the company has talked with Bear Sterns and Merrill Lynch, Kay said. The company has entertained the idea of going public because to get to the $50 million annual sales range, "you must have a strategic plan that allows you to do acquisitions and hire, retain and incorporate new talent on the employee side," Kay said.
In 1995, the company was approached by "a very large company about a possible buyout," which OTG eventually turned down. "It was one of the top three companies around,'' said Kay, who recently "put the stop on all these calls" so that the company can stay focused on growth and ensuring that its technology continues to gain worldwide market acceptance.
Along those lines, the company has developed partnership relationships with Electronic Data Systems Corp., Plano, Texas; Progressive Technologies, Bethesda, Md.; and National Micrographics Systems Inc., Silver Spring, Md., which gives those companies the right to relicense OTG software to any government agency where there is a contract in place where Windows NT is the platform, Stephens said.
"As we make inroads at some of the agencies through systems integrators, we find that there's tech refresh that goes on. We're finding we're getting a lot of calls - these calls are substantial because we get a chance to come in as Windows NT has gained in popularity, the companies that originally bid aren't where we are. We can store and maintain anything as long as it's a Windows NT environment," said Kay.
On the mass storage side, the company competes with Kodak since that company purchased Wang. Other rivals include Cheyenne, which was purchased by Computer Associates one year ago, and Seagate.
Some of OTG's competitors have substantially more resources but in the world of integration, people will migrate toward the best product, according to Schmidt. The integrator, one of OTG's principal sales channels, will choose the most reliable products and OTG has invested heavily in software development. "They have not skimped and that shows in their product," Schmidt said.
Document management covers a wide spectrum of users and OTG doesn't claim the whole space, Schmidt said, "but in their sweet spot, they do an excellent job."