AMS Moves on All Fronts To Boost Business

AMS Moves on All Fronts To Boost Business

Harry Barschdorf

By Nick Wakeman, Staff Writer

American Management Systems Inc. is aggressively pursuing alliances, partnerships and acquisitions as it tries to position itself as the federal government's premier application integrator.

AMS, long known for its financial management software and customer application development prowess, is forming partnerships with commercial packaged software providers as a way of broadening its offerings to government customers, company officials said.

"We believe we need to find the products that meet the business needs of our customers," said Harry Barschdorf, senior vice president of management systems and technology, which oversees AMS' federal financial management business. "We'll provide our own products but we also are entering into strategic partnerships with commercial providers."

The Fairfax, Va.-based company has struck partnerships to foster its capabilities in auctioning, electronic procurement, electronic commerce, customer relationship management and online services to citizens.

Partnerships and alliances struck by AMS so far include Ariba Inc. of Mountain View, Calif., a provider of electronic commerce software; Siebel Systems Inc. of San Mateo, Calif., a maker of customer relationship management software; FreeMarkets Inc. of Pittsburgh, an online auctioning company; and govWorks Inc. of New York, a developer of online government services for citizens.

"Our job is to determine the best of breed applications and integrate them," Barschdorf said.

Currently, AMS is considered one of the top providers of financial management software and services to federal agencies with over 60 federal agencies, bureaus, and departments using its software. The company also has developed procurement systems and has a strong custom application development business.

Areas where the company is looking for partnerships include federal travel management and human resources such as payroll and benefits administration, Barschdorf said. "Our plan is to have more alliances with the right players," he said.

AMS' partnerships are helping it expand what it can sell and who it sells to, said William Loomis, an analyst with the investment banking firm Legg Mason Wood Walker Inc. in Baltimore. "They are more then doubling their addressable market," he said.

The company is using the knowledge it has of the government market to bringing new products and services to its customers, Loomis said.

AMS' strategy is to combine its understanding of its customers with the new capabilities from the commercial software developers, Barschdorf said.

"It is not just about technology. You have to understand the business needs of our customers," he said.

On the acquisition front, AMS is looking to buy both services companies such as high-end strategic consulting practices, and small companies that have a unique and promising technology, Barschdorf said.

"We are not looking at acquisitions just to get bigger," he said. The deals will be in the small to midsize range, but he declined to define the parameters.

The acquisitions will fill out current offerings, add new capabilities and
gain access to new customers, Barschdorf said.

The tilt toward acquisitions is a new bent at AMS, which has eschewed such strategy in the past, making only one purchase in the last five years. In March 1999, AMS bought Budget Technology Inc. of Bethesda, Md., a company that specializes in budgeting systems for state and local governments, for between $5 million and $10 million.

AMS' traditional growth rate has stood at about 20 percent annually, but that rate may be hard to maintain without further acquisitions now that AMS has reached $1.24 billion in 1999 revenue, Loomis said.

"The government market is definitely an area where they could buy some
small to mid-sized systems integrators
to add capabilities," said Brian
Maimone, an analyst with the
investment banking firm ING Barings of New York.

About half of AMS' 1999 revenue came from the government market, with the federal market accounting for $300 million in revenue and the state and local market $346 million. AMS stock has ranged from $44.38 to $19.75 in the past 12 months. It closed at $38.25 on Nasdaq June 22.

AMS' partnerships and acquisitions will help the company battle competitors such as Andersen Consulting of Chicago and Oracle Corp. of Redwood Shores, Calif., who are turning up the heat in the government market for financial management and electronic commerce systems, Maimone said.

"The government market is really untapped and some of the bigger players are starting to realize that it is a big opportunity," he said.

The recent partnerships attained by AMS are beginning to bear fruit for the company. AMS is selling Ariba products on its General Services Administration financial management schedule. GSA also is using AMS and Ariba to auction surplus government equipment on the Web. And AMS and Siebel are working together on a project to create an integrated help desk for military personnel that have to contact the Army Military Traffic Command.

The alliances and partnerships AMS is forming are coming at a good time because the government is moving away from customized systems development, which take a lot of time and can cost a lot of money, Loomis said.

"If they can gain traction with just a couple of these alliances, it could have a great impact on their top-line revenue growth," Maimone said.

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