No. 3: Northrop Grumman rises to new challenges

Health care and biometrics provide deeper market penetration, workforce investments get top priority

Northrop Grumman Corp.

Top 100 revenue: $6.8 billion

120,00 Employees

2006 revenue: $30.1 billion

2006 net earnings: $1.5 billion

2005 revenue: $30.1 billion

2005 net earnings $1.4 billion

James O'Neill

Rick Steele

To stay at the top, you must constantly reinvent yourself. Northrop Grumman Corp. seems to have mastered that strategy.

With $6.8 billion worth of prime contracting revenue in 2006, the company has maintained its position among the top five government contractors on Washington Technology's Top 100 list, where it ranks No. 3 this year. In the coming months, Northrop Grumman plans to maintain its high perch by capitalizing on its expertise in identity management and health care information technology.

The company, whose IT sector revenue rose from $3.8 billion in 2005 to $4 billion in 2006, made several inroads in health care IT in the past year, posting various federal, state and local wins. The company is hoping to announce a few large biometric wins next year.

The company also has launched an initiative to address its need to hire talented technology professionals, a challenge James O'Neill, corporate vice president and president of the company's IT sector, said is Northrop Grumman's tallest hurdle.

After Northrop Grumman acquired Integic Corp. in 2005, the company hit the ground running with Defense Department contracts. Northrop already has 18,500 IT employees and recently hired a chief medical officer to work with the company's 22 doctors. CMO Harry Greenspun is responsible for providing strategic direction of the sector's health solutions business. He also is an adviser to the health care community on issues of technology and health policy.

One of the sector's recent health care wins was a follow-on contract from DOD to provide systems engineering and integration support to the Armed Forces Health Longitudinal Technology Application, the country's largest electronic health records system. It supports more than 9 million active service members, retirees and their families worldwide. Northrop Grumman's role in the $67.7 million contract is to provide security accreditation and information assurance, management information services, monitoring of commercial products and configuration management support.

Analysts say a company that is as large and as entrenched in the federal government as Northrop Grumman will do well in health care IT, especially because DOD and the Veterans Affairs Department are giving the area more focus.

"That gospel will spread to the state and local regions such as regional hospitals and other health care networks," said Ray Bjorklund, senior vice president and chief knowledge officer at Federal Sources Inc., which compiles the Top 100 list.

O'Neill said the company's plan is to continue pursuing health care IT contracts, particularly internationally, and more acquisitions are possible. The division did not make any acquisitions in 2006 ? in health care IT or any other area ? because "we just weren't in a position to acquire," O'Neill said. Teaming agreements with companies that have complementary software or technology is a more viable option these days, he added.

His McLean, Va.-based division made some progress in identity management when it completed development of a fingerprinting system for the United Kingdom's Police Information Technology Organisation. The company, which won the contract in 2004, built a database search capability that lets police officers take a person's fingerprint with a mobile device and run it through a large database linking several law enforcement departments.

DOD also hired the company earlier this year to build a system of systems for $75 million to integrate its worldwide biometrics efforts. Now Northrop Grumman IT is competing for a contract to implement a national identification card in the United Kingdom.

"Identity management is such a hot topic in all industries, whether it's defense, social welfare [or] insurance," O'Neill said.

But analysts say identity management will take a bit longer to gain momentum in the federal marketplace.

"It's a very challenging area, and it's hard for the government to get their arms around it," Bjorklund said. "It's going to take many years for that to be embraced by the government."

But getting the government to buy into identity management is not the sector's only challenge. O'Neill said the company's IT unit will hire 6,000 people this year, adding to the 4,000 it hired last year. But finding talent ? particularly software engineers, hardware engineers and mathematicians ? has been a struggle.
With a promise not to offshore work, Northrop Grumman has started opening offices in rural areas of the United States where it expects to hire people.

As part of the initiative, the company is writing checks to high schools, community colleges and universities in those areas to fund the creation and development of IT curricula and internships.

"We can get people who are Americans and want to stay in the community they grew up in and still be part of a high-tech business, as opposed to importing them to Northern Virginia," O'Neill said.

Profiles of the Top 20 companies in the 2007 Top 100

No. 1: Lockheed Martin's reinvention

No. 2: With SBInet, Boeing IDS takes flight

No. 3: Northrop Grumman rises to new challenges

No. 4: KBR gets down to business

No. 5: IPO catapults SAIC into a new era

No. 6: Raytheon strives for balance

No. 7: General Dynamics in full sprint

No. 8: Fluor's ready in a pinch

No. 9: L-3 leadership stays the course

No. 10 EDS, Hard-learned lesson

No. 11 CSC, Experience that counts

No. 12: Battelle seeks new frontiers

No. 13: Booz Allen, Quality over quantity

No. 14: Bechtel telecom makes a splash

No. 15: For BAE, persistence pays off

No. 16: ITT makes a push into new markets

No. 17: Dell, Talking about evolution

No. 18: Technology and service fuel IBM

No. 19: Verizon caps off a busy year with a big win

No. 20: United Technologies gains altitude

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