The company's Worldwide Technology Business unit posted $700 million in revenues and grew by 20 percent in its fiscal 1998, which ended March 31. The privately held McLean, Va.-based company's strong commercial consulting business raked in another $700 million in revenues for fiscal 1998.
"We are doing well," said Ralph Shrader, president of the company's Worldwide Technology Business unit. It has 5,500 employees spanning six market segments: defense, national security, civilian government, international government, state and local governments, and commercial technology.
Shrader, who prefers to talk about his company's people rather than profits, said his unit has a backlog of $2.1 billion in contracts and has grown at an annual rate of 14 percent since 1985.
"We can bring some of our commercial expertise into the federal marketplace and are able to leapfrog [agencies] into the next generation of solutions," said Shrader, whose company helps agencies assess their mission and structure and implement new technology.
Many of the public sector group's recent wins are multiple award contracts where the company must compete for task orders from federal agencies. These wins have given Booz-Allen an entree to even more government customers because many large contracts are open to all federal agencies, he said.
The Department of Defense is Booz-Allen & Hamilton's largest client, accounting for about $280.9 million in revenue in the company's 1998 fiscal year. Civilian agencies brought in another $140.6 million, while national security agencies garnered $135.5 million. International governments comprised $64 million in revenue and state and local governments were worth $38.8 million.
In fiscal 1998, the public sector unit's state and local business was up 39 percent. Civilian federal government revenues rose by 33 percent, defense increased by 19 percent and national security rose 18 percent.
Competitors include Science Applications International Corp., Computer Sciences Corp. and TRW Inc. by way of its acquisition of BDM International late last year. But several Big 6 accounting firms such as KPMG Peat Marwick and Andersen Consulting are pushing into the government market and company officials expect the merged Pricewater-
houseCoopers to be a formidable competitor.
"There are a lot of mechanisms in place now where the government can recognize and reward talented support," Shrader said. "We are not a firm that wants to be out there in the low-cost marketplace. We are interested in clients and opportunities where the client can sit down and say, 'Booz-Allen is the best value that I can get.'"
Tom Rodenhauser, president of Consulting Information Services of Keene, N.H., a firm that helps organizations pick consulting firms, said Booz-Allen's historic strength in the government sector - it began doing defense work in the 1940s - has kept other consulting firms from making major inroads into the federal sector.
Since 1994, Booz-Allen & Hamilton has won contracts such as the General Services Administration's $3 billion telecommunications technical and management support services contract, a defense contract for business process re-engineering services worth $200 million, and the GSA's Federal Systems Integration and Management contract valued at $840 million.
It also looks for high-profile contracts such as the consulting work it did in 1997 for the Washington Metropolitan Police Department and a contract with the Internal Revenue Service worth $6 million, Shrader said. In the IRS project, the company is examining ways the beleaguered agency can improve customer service and adopt commercial best practices.
Procurement reforms that the federal government began instituting in 1994 have been a boon to Booz-Allen & Hamilton because they have given rise to best value contracting, Shrader said. But the government's desire to become more efficient is also fueling demand for business process re-engineering and management consulting expertise - other core company capabilities, he said.
Booz-Allen & Hamilton is playing well in the public sector market because the government is looking at more projects that combine business process re-engineering skills with information technology, said Bert Concklin, president of the Professional Services Council in Arlington, Va.
The market research firm Input of Vienna, Va., estimates that IT-related professional services, which includes business process re-engineering, will grow from $5.6 billion in 1997 to $7.5 billion in 2001.
"Booz has captured a large share of the public sector market and it scares other consulting firms off," Rodenhauser said.
Booz-Allen & Hamilton was in the midst of some structural changes in 1994 when the sweeping government procurement reform process began. The company had too many operating units that overlapped. "There were opportunities coming down the pike and we would literally have two or three of our operating entities saying we could do that," Shrader said.
That might have worked in the days when a $100,000 contract was a big deal, but when contract values started creeping into the $200 million plus range, using smaller operating units was not feasible, he said.
"You don't win [the large contracts] with little practices," he said. "You win them with the full power of your institution deployed broadly against the opportunities."
As a result, Shrader's division is built around six markets each headed by teams of partners, who are the owners of Booz-Allen & Hamilton. The company has 250 partners, who own the company and are active in running it, Shrader said.
That structure makes the company much more "introspective" about its operations and allows the company to take a longer term view of its operations, Concklin said.
"Booz-Allen is like a quasi-university," Rodenhauser said. "They have a very academic approach."
Shrader said the company's success in the different markets comes back to people. A survey of employees by a consultant earlier this year found that they are very satisfied with their work but the company is nonetheless striving to improve, he said.
Company officials are considering initiatives to define career tracks, provide more training opportunities and possibly overhaul the way employees are evaluated and rewarded, he said.
Said Shrader: "The time to do this is when you are strong and not weak."
Worldwide Technology Business Unit's Fiscal 1998 Revenues