GTSI: The Sun Finally Shines

Top government solution provider GTSI Corp. (VARBusiness 500 No. 62) named Scott Friedlander president and COO in December. Friedlander joined GTSI, Chantilly, Va., seven years ago after a 19-year career at Xerox Corp., Stamford, Conn. In his most recent position with Xerox, he was responsible for the company's public sector operations for the North America Solutions Group.

"I came to GTSI to move it to the enterprise, and through some turbulence and a lot of change," Friedlander said. "It's been really exciting these last two years—really sensational."

He said his near-term goal is to continue the transformation he helped start following GTSI's emergence from a rocky financial period.

Eighteen months ago, GTSI's CFO left amid charges of accounting errors that forced the company to restate earnings for two years and prompted NASDAQ to notify GTSI of its possible delisting. At the time, GTSI was one of the biggest public VARs in the government sector, an important partner to vendors such as Microsoft (NSDQ: MSFT) Corp., Sun Microsystems (NSDQ:JAVA) Inc., Cisco Systems (NSDQ:CSCO) Inc. and Panasonic Corp.

Even before the accounting errors came to light, GTSI had a tumultuous history. Eleven years ago, it nearly went bankrupt. Two years earlier, in 1994, it paid $20 million for Falcon Microsystems and then lost a U.S. Air Force contract at the same time. In addition, the solution provider was facing difficulty delivering memory cards.

At that time, Dendy Young came in to steer the teetering ship. Young replaced most of the management team and took a $1 annual salary. But last year, Young—who won the VARBusiness 500 Lifetime Achievement Award in 2003—relinquished his CEO title and James Leto took over as president and CEO. Young retired earlier this year and another round of restructuring followed.

The tide has seemingly turned again. Recently, GTSI capped 12 consecutive months of growth. In mid-December, the $850 million solution provider's stock hovered around $9.09 per share, well above its 52-week low of $7.64 but trailing its 52-week high of $13.90.

GTSI's success, Friedlander said, is based on a three-pronged approach, starting with its human capital management plan. "We've started moving from a 'job' company to a 'career' company," he explained. Today, he noted, many more employees are three-, five-, 10-, 15- and even 20-year veterans of GTSI.

Second is GTSI's continuing evolution to provide enterprise solutions and services. "I am proud to say that we saw triple-digit growth in services this year, including project and program management," Friedlander said.

Third is the legacy business, small-order initiative and moving to a touchless, Web-based approach. Friedlander said his goal is to improve each of those areas and mature them. "We'll continue to focus on our large, program-level effort and on professional, financial and staff augmentation services," he said.

Much of GTSI's transformation has involved employee training. Friedlander said the solution provider has spent $1 million annually during the past three years helping employees attain education and certifications.

"In 2005, 2006, we were in survival mode," Friedlander added. "Now, we are in growth mode, transformation. All the pain we went through, it's like after a big storm and now the rainbow is out."