Keane Branches Make the Business

Keane Branches Make the Business<@VM>Keane Inc.

Susan Case

By Steve LeSueur, Staff Writer

Keane Inc. is using its emphasis on branch offices to give it an edge in the highly competitive state and local government market.

While many of the top information technology companies have business units that deal specifically with state and local customers, Keane takes a decentralized approach. The Boston-based company pursues most of its local government work through its approximately 50 branch offices, which have responsibility for both public and private sector work.

This allows for cross-pollination between government and commercial work, company officials said.

"The public sector is looking for commercial best practices," said Susan Case, a vice president of business development in Keane's Rockville, Md., office. "We can do that, because the branch perspective incorporates both commercial and public-sector accounts."

Keane coordinates its state and local government work through its Public Sector Task Force, a group that was established formally about a year ago to help the branches with their government projects.

Bill Balutis, director of sales in Keane's corporate office, heads up the task force, which includes representatives from the branch offices and Keane Federal Inc. of Rockville.

While Keane usually is not thought of as a leading player in the state and local market, its total annual revenue in this area is about $75 million, which puts it among the top dozen systems integrators in terms of revenue. The Public Sector Task Force has spurred additional efforts in that market, officials said.

"We've definitely seen an increase in both opportunities and our ability to win the deals out there," Balutis said.

Keane also intends to make itself better known by targeting the state and local market through advertising and attendance at trade shows and conferences geared to that market, similar to Keane's campaign in the federal market, officials said.

"Keane's branch structure ties in well with the state and local market," said Bill Loomis, managing director of the Technology Research Group at Legg Mason Inc. in Baltimore. It allows their branch people to build the relationships with local government customers who have unique problems and needs, he said.

Company officials point to a number of successes that show how the company has used both its commercial work and federal government work as springboards into the state and local market.

In Cuyahoga County, Ohio, for example, Keane is using its experience with Web applications in the private sector to put together a strategic plan for the Recorder's Office to provide Internet access and image processing of over 30 million property records. Keane intends to bid on the subsequent development project to make the records available online to citizens and title agencies.

"Electronic commerce is an area where industry is a front leader, but governments are not far behind," said Balutis.

Other contracts include highway transportation work, first performed for the Federal Highway Administration, which helped Keane land a contract to develop a traffic accident analysis system for North Carolina. And Keane is pursuing a blanket contract among New Hampshire, Massachusetts, Rhode Island and Vermont that would enable government agencies in those states to hire Keane for a variety of services, including IT consulting and strategic planning, applications and e-commerce development and system management.

Keane last year garnered $150 million from its federal, state and local government work, about 15 percent of its total revenue. When it competes for contracts, the company often bumps up against the national systems integrators, such as Andersen Consulting, Electronic Data Systems Corp., IBM Corp., and PricewaterhouseCoopers.

After rapid jumps in revenue during the past three years, from $506 million in 1996 to $707 million in 1997 and $1.1 billion in 1998, Keane late last month scaled back its revenue projections for this year, announcing that 1999 revenue would be even with 1998's level.

Its stock has dropped in recent weeks, trading at about $20 a share after reaching more than $60 a share about a year ago.

The problem, Loomis said, is that Keane's year 2000 business dropped more rapidly than expected, and at the same time, governments and companies are not starting new, non-year 2000 projects as quickly as expected.

Keane officials, however, said that the outlook for IT services remains positive in the long run. They expect state and local governments to be a fertile market.

"If you do good work for one state, the other states hear about it," said Nancy Lee Hutchin, practice manager for application outsourcing at Keane. Headquarters: Boston

Chairman and CEO: John Keane

1998 Revenue: $1.1 billion

1998 Net Income: $96.3 million

Employees: 10,500

Business: IT services, including Y2K, data warehousing and applications development and outsourcing

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