Orkand Will Pass on Merger and Acquisition Frenzy

Orkand Will Pass on Merger and Acquisition Frenzy

Donald Orkand

By Richard McCaffery, Staff Writer



Merger and acquisition mania may be sweeping the systems integration industry, but the Orkand Corp. has no plans to join the action.

The Falls Church, Va., information technology firm grew its revenue to $80 million in 1998 by winning new task orders, hiring workers that fled other mergers and focusing on help desk services, year 2000 work and document management services.

The 1,300-employee company, which competes with integrators of all sizes, generates most of its revenue from work for civilian agencies. Its 1997 revenue was $62 million.

"None of our growth has come through acquisitions," said Donald Orkand, president and chief executive officer of Orkand. "As more companies get bought and sold, our stability is becoming a tremendous differentiator."

But consolidation is buffeting the industry. As the government issues larger contracts, companies are bulking up to compete, and integrators in the $50 million to $80 million range are getting squeezed, said Bob Dornan, senior vice president of Federal Sources Inc., a McLean, Va., research company.

These companies do not get the political protection offered small firms, such as 8(a)s, or enjoy the economies of scale of the bigger players, Dornan said.

"The top 15 to 20 companies are capturing more business," he said.

Jon Kutler, president of Quarterdeck Investment Partners Inc. of Los Angeles, agreed a company Orkand's size is in a tough position.

"It's an uphill battle," he said. "The market today is about cost and how you make yourself more competitive. It's hard to see how someone can stand alone at that size. Everybody is into one-stop shopping."

Founded in 1970, the privately held Orkand Corp. got its start developing information technology systems mainly for customers at the Defense Department. Almost all of its business is with the federal government, including customers such as the Navy and the departments of Energy and State.

Orkand said he expects to boost the company's revenue to $200 million by 2002 through organic growth and stepping up efforts at the Department of Defense.

The company also will continue selling services off the General Services Administration schedule and pursue government wide acquisition contracts, where past performance is weighted heavily.

"Those are good vehicles for our company, a midsize company," Orkand said.

Indeed, the company grew revenue 30 percent in 1998 selling services off the GSA schedule and through GWAC contracts.

In July 1998, it won a recompete GWAC contract worth $30 million from the Labor Department, and in January it won two task orders worth $430,000 from the Energy Department. Orkand Corp. has worked with the Energy Department since 1975.

"Don Orkand has been well-focused," said Dornan. "That's good. You can grow a company at a healthy clip and not get overextended."

In addition to the task orders, Orkand Corp. opened a office in Sylva, N.C., in November 1998 that will focus on selling document and data management services.

For the last five years, Orkand Corp. has managed all climatological data collected by the National Oceanic and Atmospheric Administration. Orkand expects to leverage that experience in a growing field.

"That capability is in large demand in commercial and government areas," he said.

Analysts agreed that smaller integrators with strong track records have some advantages.

"A lot of the smaller guys are offering niche services that the bigger guys aren't interested in offering," said Brian Haney, senior analyst at Input, a Vienna, Va., market research firm.

Smaller players can often do more in the way of adding a personal touch. "A lot of government agencies are looking for that," Haney said.

Orkand believes the push to get big is a short-lived trend. "I think the momentary emphasis on large companies will go away," he said, mainly because midsize companies can be more flexible and focused on clients.

He pointed to the pending sale of GTE Corp.'s Government Systems Division and Boeing's Information Services unit as evidence. "What this has done is very simple," Orkand said. "A lot of customers are saying, 'Who am I signing up with?' "

Orkand Corp. has taken advantage of some of the consolidation, hiring 13 workers that fled other mergers in just the last six months, a company official said.

One of Orkand Corp.'s strategies this year is to re-establish itself at the Department of Defense. At one time Defense Department customers made up 70 percent of the company's customer base. But Orkand, acting on concerns about military cutbacks in the mid-1980s, started pushing for business on the civilian side.

The company was ahead of its peers in the mid-1980s in predicting military downsizing and won contracts with the U.S. Postal Service, the Bureau of Labor Statistics, the State Department and the Centers for Disease Control and Prevention.

Business blossomed, and by 1992 revenue exceeded $30 million.

Now, 85 percent of Orkand Corp.'s business is with civilian agencies. "I think we overcorrected," said Orkand. By 2001, Orkand wants up to 35 percent of revenue coming from defense customers.

He declined to name any contracts the company is chasing, but said he is focused on the Army and Navy, which, like many other federal agencies, require large-scale client-server systems to manage personnel.

Orkand Corp. has done similar work for the Postal Service, State Department and other agencies. "We're in a nice position to compete," Orkand said.

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