Outsourcing Opportunities Fuel TRW's Growth Plan
Outsourcing Opportunities Fuel TRW's Growth Plan
Outsourcing, defense initiatives and other high-profile projects are driving TRW Inc.'s information technology business to new heights.
TRW Systems and Information Technology Group, with Philip Odeen at its helm as executive vice president and general manager, will pocket billions of dollars from lucrative efforts to manage missile systems for the Pentagon and process millions of census records.
The coming year also will bring new opportunities as the $3 billion Reston, Va.-based unit of TRW Inc., Cleveland, rolls out a new travel system for the Department of Defense, pursues an array of new command and control projects and positions itself as a dominant player in government outsourcing.
Odeen, who shaped the TRW information technology business 18 months ago by merging his old company, BDM International Inc., with TRW's Systems Information Group, talked about his strategy in a recent interview with Washington Technology Staff Writer Nick Wakeman.
WT: What is your major growth business?
Odeen: The area where we have had the biggest growth in the last year is outsourcing. The obvious [projects] are IT things, but the real story is in a different set of areas.
One is the Integrated Space Command and Control Contract for the U.S. Space Command at Cheyenne Mountain in Colorado. This could be a 15-year contract to take over all their existing systems.
They want a single integrated system rather than the current 25 separate systems that require more maintenance. We are bidding on this one.
The two other primes are Lockheed Martin and Raytheon. [Litton-PRC dropped out. The request for proposals is planned for release this month.] This is a very unusual one. There is no written proposal, but there will be a 12-hour oral proposal.
WT: Why oral proposals?
Odeen: They want to see the whites of the eyes of the people they are working with. You don't bring in actors, you bring in the people that actually will have those jobs. So the program manager and all the key people have to be there and must be ready to answer questions.
From there, they will cut it to two contractors. Each one will have a contract of $2.5 million to $3 million for five months. For those five months, you will go in and start working on what your new architecture would be for all these systems and begin to demonstrate how you would begin to migrate systems to a common architecture.
People can write fancy proposals and all that stuff, but they want to see what you really do rather than who has the best brochure and the best slides.
WT: Who is on your team?
Odeen: We have five major partners: Science Applications International Corp., IBM, Oracle, ITT and Harris. [Lockheed Martin's major teammate is the Boeing Co., while Raytheon Co. has teamed with Computer Sciences Corp., which at one time was considering a bid as a prime.]
WT: Is there a mad rush to find partners for such efforts?
Odeen: Yes. Everybody wants to put together the best team, and there is always a handful that everybody wants. So that is critical.
WT: How much of your business is related to outsourcing projects for the government?
Odeen: This year, it is probably close to $400 million. Next year, it will be higher because of the Census [Bureau project] and the [intercontinental ballistic missile] program will be growing.
The government, especially the Air Force, is asking for Total Systems Performance Responsibility.
The first really big program like that was the ICBM Prime, where the Air Force went out to the commercial world and said, 'We want a contractor to come out here and take over management of the missile force.' This is a long-term program. [TRW won the contract in December 1997. It is worth $3.4 billion over 15 years.]
We make sure the operating systems are right, the guidance systems are operating accurately. We do flight testing. We do checks on them all the time, making sure everything is operating correctly.
We also are doing two major upgrades. The Air Force took guidance systems that Boeing was doing and a contract for replacing fuel propellants and folded those two contracts under us.
So again, the Air Force only has to manage one contractor.
WT: What is your next biggest growth area?
Odeen: The latest buzzword is C4ISR [command, control, communications, computers, intelligence, surveillance and reconnaissance].
We have a strong position in the Army in that area. We are the prime on the digitization project [known as Force XXI Battle Command Brigade and Below] for the Army.
We are taking information systems and applying them to the battlefield. We developed software that they use to capture information about the enemy, about where you are and where all your friends are. The information is displayed on ruggedized laptops over a tactical intranet. Everybody is tied together, whether it is personnel carriers, tanks, headquarter elements or artillery pieces.
This is a very big program. We have been doing a series of major tests and experiments at the National Training Center [at Fort Irwin, Calif.,] and at Fort Hood [in Texas,] where part of the 4th Infantry Division has been digitized.
The Army is planning to equip one division a year for the next 10 years. I think the Army would say this is its highest priority modernization effort because of the enormous impact it has on force readiness.
WT: What is the status of the Defense Travel System, originally set for roll out by June?
Odeen: We had hoped to be done by late May or June, but we just did not get all the testing done, and the Defense Finance and Accounting Service had to take a kind of hiatus because during the last quarter of the [fiscal] year, they have too much to do. So we are still testing. And we will roll it out in the November-December time frame.
Other agencies have been asking a lot of questions about it. They all want to see it run. We also are talking to some defense contractors about using it, and we are talking about using it ourselves.
Defense contractors are subject to the same per diem rates and travel regulations as the government. We have the same kind of issues as the government.
But the Defense Department will be the first user of the system. Eventually, there will be a couple million people on the system.
WT: How will the consolidation craze impact TRW in the coming year?
Odeen: We are on a debt reduction [course] right now. When we bought LucasVarity [a London-based automotive and aerospace company], we took on $7 billion in debt.
This time next year, we are going to be actively looking at acquisitions. But for the next six to eight months, we will be pretty busy generating cash and selling off some pieces of the [LucasVarity] automotive business to generate cash.
We have committed to Wall Street that we will reduce debt by $2 billion by the end of this year. We are on track to do that. We will generate $500 million internally, and we will sell $1.5 billion in assets, mostly automotive parts that are not seen as core.
But there will be a lot of activity in the coming years, especially in the middle tier. Boeing, Raytheon and Lockheed Martin know they cannot do many more acquisitions. Not that they can't do a little niche thing here or there, but they aren't going to be allowed to acquire us or Litton or any of the other players.
But if you take the platform business out of Boeing or even Lockheed Martin and just look at the systems stuff, the differences in size between us and the big ones are not that great.
In our aerospace and information sector, we have a little more than $6 billion [in annual revenue]. So we are a big player in the sector.