2015 TOP 100
Top 100: GD embraces changing landscape
- By Nick Wakeman
- Jun 09, 2015
As the new leader of General Dynamics Information Systems and Technology Group, S. Daniel Johnson is an old hand at the company.
He’s led GD’s information technology business, known as GDIT, since 2008. efore that, he was chief operating officer of GDIT, and joined General Dynamics when it acquired Anteon in 2005.
But just because he has a long history at the company doesn’t mean he’s shied away from change.
Even before he became executive vice president of GD Information Systems & Technology Group, Johnson helped lead the effort to flatten the group’s structure from three units to two, which is helping the company remain competitive in a tight market.
General Dynamics ranks No. 5 on the 2015 Washington Technology Top 100 with $4.1 billion in prime contracts.
During a conversation with Editor-in-chief Nick Wakeman, Johnson talked about his strategy and the trends he sees shaping today’s market.
WASHINGTON TECHNOLOGY: Talk about your customers. How have their priorities changed?
Johnson: If you look at our enterprise IT business, that's changing because of the cloud. More and more government entities want to take advantage of that and not build these huge IT infrastructures. They want to rent it instead. That’s a change. It hasn’t been overwhelming yet, but things are going that way.
Mobile devices have been a big change. We’ve also taken on virtualization. We are doing this in some of the intelligence communities. Think about having 8,000 laptops that need to be maintained with current versions of software. That’s a big expense.
WT: Are you partnering with different companies to bring in those capabilities?
Johnson: We partner with a lot of technology providers. The data center guys. The storage guys. The software guys. You have to have strong relationships with all of them.
But you need the systems integrator because someone has to know the customer, understand the requirements, the organization, their business habits and the policies. You take all that and the technology and apply it to be successful.
WT: GD has made some divestitures and some acquisitions in the past year. Why is doing that important, and what kind of skills are you trying to put in place?
Johnson: We made one acquisition, and that was a small company [ARMA Global] headquartered in Tampa that was doing business with the Special Operations Command. It was sort of like the planets had to align because we were taking to them for 18 months before they decided to sell.
They were a tremendous performer in enterprise IT and related areas. They kept winning big jobs, and in some cases, they were beating us.
One thing they had that was very attractive was they had a lot of former special operations people, and the special operations folks like to do business with other special operations folks.
We know the special operations community is going to continue to get funding and we looked at ARMA’s profile. They were the right size. They were doing business where we wanted to be. They had a huge backlog.
That made it very low risk in terms of doing an acquisition.
We’ve also done some fine-tuning and divested our Fidelis business. And the reason there is they were a commercial cyber product business. We didn’t think we’d get the returns there given the investment we’d have to make to compete with the likes of FireEye and Mandiant.
That doesn’t mean we don’t do cyber services. We certainly do.
WT: We’ve seen a lot of contraction in the market. Where do you think we are? Have we hit bottom?
Johnson: I think 2015 is going to be pretty close to ’14, but 2016 still scares us because sequestration is still hanging out there. We think defense services will hopefully bottom out in 2016. But I think it will come back.
One thing that is going to help us in 2017 is going to be how the Army decides to execute WIN-T. That’s a big program, and as it starts to ramp up to full production, that should pull us with it.
WT: What’s the biggest change that you’ve seen in the market over the last couple years?
Johnson: One thing is that the focus on low price has generated a bit of decrease in the quality of support to the government. And secondarily, about five or six years ago, we started tracking this notion on the government side that services contractors were making too much profit. So, they switched more to cost-plus contracts where they can manage how much profit you make.
As you look at the margins for all of the pure-play services contractors over the last five years, they’ve been in a significant downslope. But I don’t think the government has really saved any money because what happens is there’s no incentive to be efficient or be good because you’re getting paid by the hour.
WT: What do you see as your primary opportunities moving forward?
Johnson: On the services side, we’re going to continue to push health care. We’re going to push intell. We’re going to look at the periphery of things like public safety and perhaps some of the state and local marketplace. That’s until defense comes back, and we’re confident that eventually it will.
Nick Wakeman is the editor-in-chief of Washington Technology. Follow him on Twitter: @nick_wakeman.