Fortress Plans Push for Gov't E-Security Work

Fortress Plans Push for Gov't E-Security Work<@VM>Fortress Technologies, Inc.

Geoffrey Stilley

By Jennifer Freer, Staff Writer

As government agencies move ever quicker toward establishing e-government practices, a Tampa, Fla.-based business that specializes in providing secure Internet information is throwing its hat into the ring to help lead the e-gov push.

Fortress Technologies, a developer of secure network communications, launched its public-sector unit June 26. The public-sector group, based in Vienna, Va., will focus on federal government agencies, but plans to expand into the state and local government arenas as well, according to company officials.

"Agencies are very interested in Internet transactions and security," said Geoffrey Stilley, vice president of federal sales and marketing. "The government is looking to move from just e-mail to robust e-business practices, and security is a crucial part of that."

Fortress specializes in network security products and services, and features technology that company officials believe sets it apart from other security products.

As a private company, Fortress does not release revenue information, but is considering going public in the near future, according to company officials. Hoover's Inc. of Austin, Texas, an online business information company, estimated that Fortress had 1999 revenue between $5 million and $10 million.

Fortress' main technology is called Secure Package Shield, a patented, fully automated encryption technology. It combines data authentication, data checking, key exchange and data compression to provide secure communications within offices, between offices and among mobile users. It allows agencies to reach its private network anywhere at anytime, both in a secure fashion and at a reasonable cost.

"It's a good time to get out there," said Thomas Meagher, vice president of equity research for the investment banking firm BB&T Capital Markets, a subsidiary of Scott & Stringfellow Inc., Richmond, Va. "The top concern of government agencies and constituents is security and privacy. Plus, e-government spending is increasing."

In fact, the federal market for electronic commerce will see growth of 10 percent annually from 1999 to 2004, according to Input, a market research firm in Vienna, Va. Federal spending on e-commerce-related systems, software and services is estimated at $719 million in 1999 and $1.1 billion by 2004

"Any sort of encryption products and services is very hot," said Paul Hammer, vice president of the technology, media, telecommunications group for Houlihan Lokey Howard & Zukin, an investment banking firm in McLean, Va. "[The Washington region] is a better area than Silicon Valley to launch a government security group, because this area understands government, which makes [the group] more likely to succeed."

Fortress Technologies has had some federal government customers since the company began in 1995, but now is diving headfirst into the government market. It has 100 employees, 12 of whom work solely on federal business. Most of the company's federal customers are military agencies, such as the Air Force, Army, Navy and the Defense Department.

Rather than be a prime contractor on large government contracts, the company intends to partner with systems integrators, such as Computer Sciences Corp., El Segundo, Calif., and CACI International Inc., Arlington, Va., both of which carry long-term relationships with government agencies.

It has also teamed with 8(a) firms, such as Seidcon, Oceanside, Calif., and Systems Plus Inc., Rockville, Md., and with Science Applications International Corp., San Diego, to help resell its security products.

Fortress officials said they also have made inroads with five other agencies that they hope to develop by the end of September, but they would not give more details.

In general, Fortress is focusing on agencies that have a special need to protect sensitive data, such as the Internal Revenue Service, the Justice Department and NASA.

Fortress has worked for the Florida cities of St. Petersburg, Safety Harbor and Tampa, and has plans to build up its state and local government business, Stilley said.

That position is supported by analyst Meagher, who said there is a place in the state and local market for smaller software solutions companies, and Fortress could be one company to cash in. There is more emphasis on providing services electronically on all levels, especially the local market, he said, and "it's an area that larger companies haven't touched."

Fortress plans to "get its name out in the market since name recognition in government is so important," Stilley said.

The company intends to help solve many security problems seen in the industry, such as loss of information, and theft of data and credit card numbers as well as money. Losses from these crime areas totaled $19 billion in the government and commercial sectors in 1999, according to Fortress.

One government move that also could spur Fortress revenue is Presidential Decision Directive 63, issued in May 1998, which says government agencies must be secure from Internet infiltration by the end of 2001. Meeting that directive could enable companies such as Fortress to further move its technology into the government arena. Many agencies are moving money around to comply with the directive, Stilley said.

The timing is just right for Fortress to plunge fully into the public sector, according to Stilley. In 1999, businesses and agencies knew they needed security technology but were overwhelmed with Y2K preparation. Now that dreaded but essentially harmless event is a memory to government agencies, and they can move forward with enhancing their Internet security.

Fortress Technologies, Inc.

Business: A privately held technology firm specializing in developing secure network communications for government agencies, organizations and corporations.

Headquarters: Tampa, Fla.

Chief Executive Officer: Aharon Friedman

Employees: 100

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