Keane Steps Swiftly Into New Federal Arena
Keane Steps Swiftly Into New Federal Arena
By Richard McCaffery, Staff Writer
Keane Federal Systems Inc.'s new high-end consulting division, which competes with the Big Five accounting and IT consulting firms, is off to a good start in its quest to round out its government offerings.
It has landed two contracts, including a $200,000 award from the General Services Administration to redesign the government's personal property program, and has 30 potential deals in the pipeline, said John Blackman, the Keane executive tapped to head the consulting division.
Blackman, who wants to build Keane Public Enterprise Consulting into a $5 million a year business within two and a half years, said he expects to close three to five of those deals by the end of the first quarter.
His unit, which formally opened its Washington headquarters in November 1998, is the first step that systems integrator Keane Inc. of Boston has taken in the public sector to focus on IT legislation, policy and planning.
"The overall goal is to realize pass-through business that can expand Keane," Blackman said. The division will target contracts ranging from $50,000 to $1.5 million, he said.
Bill Loomis, managing director of the Technology Research Group at Legg Mason Inc. in Baltimore, said Keane has a good shot at succeeding against the Big Five.
"That's exactly the group they compete against in the commercial sector," Loomis said. "Now, they don't have the mass in government that they do in commercial, but I think they'll be able to leverage that high-level expertise."
Overall, the new Keane unit is targeting federal, state, regional and local government markets as well as not-for-profit organizations involved in public-private partnerships. Its goal is to help craft IT legislation and assist agencies with interpreting, building and implementing strategies around it.
On the heels of the unit's GSA win came a $20,000 contract with Washington law firm Fensterheim & Bean to help resolve a dispute at the Federal Deposit Insurance Corp. regarding a public-private partnership program.
"We want to no longer simply be the recipients of the architecture of how government works. We want to be the architects," Glenn Giles, Keane Federal's general manager, told Washington Technology.
Estimates of the size of the federal IT consulting market vary because agencies differ over what is considered consulting, according to Robert Dornan, senior vice president of Federal Sources Inc., a McLean, Va. market research firm. But make no mistake, it's a healthy market, Dornan said.
"There's substantial work to be done and the money to do it. The government is unable to hire and retain the kind of high-level people needed to do this," Dornan said.
Keane's competitors certainly have found success in the government market. Therese Morin, a partner at PricewaterhouseCoopers, said the company's government revenues for 1998 reached $340 million.
Barry Kaufman, a partner in business consulting at Arthur Andersen's government services practice, said the company doesn't break out all of its revenues, but that its worldwide consulting business had revenues of $1 billion last year. "It's one of our eight targeted industries," he said.
Keane Inc., Keane Federal's parent company, is an application development, outsourcing and integration services firm. The company has grown quickly. Its revenue shot from $467 million in 1996 to $654 million in 1997.
Loomis, who expects the company to hit $1 billion in revenue in 1998, has given the company a buy rating and a 12-month price target of $57. Keane finished trading Jan. 15 at $39.62.
Keane Federal has grown just as fast. The unit is focusing on four areas: application development, year 2000 remediation services, IT assessments and outsourcing. Customers include the Department of Defense, the Agency for International Development and the U.S. Immigration and Naturalization Service.
It had revenue of $22 million in 1996, and officials expect 1998 revenue to hit $65 million.
Officials at Keane started talking about launching a high-end consulting division in early 1998 and got serious about the venture last summer, Blackman said.
Keane assembled a team with broad experience, from career government executives to lobbyists and Capital Hill staffers. Blackman has 25 years of government service under his belt and was previously business development director at Keane Federal. In addition to Blackman, the consulting division has five full-time principals and a dozen other independent consultants at its disposal.
The consulting unit is focusing on three types of services: strategic planning, management development training and organization assessment programs.
Officials at competitors PricewaterhouseCoopers of New York and Arthur Andersen of Chicago both took notice of Keane's recent start up, but took the news in stride. Most agree there's lots of business to go around.
"I think there's always a place for firms that add value," Kaufman said. "If [Keane] can do that, they'll participate with the rest of us."
Morin of PricewaterhouseCoopers said the government IT consulting market needs a leader, and Pricewaterhouse has positioned itself for the top spot.
"There are a lot of firms in there, but what we've found is no one has taken the lead in what we call owning the issue ... We see ourselves as thought leaders in the whole area of chief information officers and government," she said. In fact, the company just published a book called "Information Leadership: A Government Executive's Guide."
But Kaufman drew the line at helping to craft laws. "We don't try and write legislation," he said.
Morin said PricewaterhouseCoopers is involved in crafting legislation insofar as it testifies on various IT issues, but she stopped short of saying this is an area the company focuses on.
Is there a market for consultants in this area? Some analysts think so.
"I think Keane is going in the right direction," said Brian Haney, senior analyst at Input, a government market research firm in Vienna, Va. "Any company that's targeting that level of individual is off to the right start."
Thanks to procurement reform, agencies can now buy products so quickly that vendors don't have much time to react, Haney said.
"The way to get around that is to be one of the people in there talking to agencies about policies and strategy," he said. "First, you want to win business, but, second, you want to shape business. The second is more important right now. A lot of the agencies don't know what they want."