CRN Interview: Ernst Volgenau, SRA International

Ernst Volgenau founded IT consulting and systems integration firm SRA International in 1978 after retiring from 20 years of service in the U.S. Air Force. He continues to serve as president and CEO of SRA, which offers systems design and integration services, disaster-response planning services and outsourcing to its customers. Washington Bureau Chief Amy Rogers recently spoke with Volgenau.

CRN: What percentage of SRA's work is for clients in the federal government?

VOLGENAU: We work primarily with the federal government. We have three markets that we serve. One is national security, and that includes the Department of Defense but is not limited to it. It might include, for example, components of homeland defense and the intelligence agencies. This is about 55 percent of our business. Our civil agency work is just under 30 percent, and public health and health-care work is just under 20 percent.

CRN: Which areas are growing?

VOLGENAU: There are always some areas that are growing faster than others, but our company has always grown [overall]. If you look at the 10-year period from 1991 to 2001, which is before we went public, our compound annual growth rate was about 20 percent per year. In the 1990s, with the Net and dot-com boom, government contractors were largely overlooked. Now that the economy is in recession, we are seeing new competitors. There are more companies trying to get into the federal [space] because of increased defense spending, the war on terrorism and other factors.

CRN: There is a new federal fiscal year under way. The defense budget has been approved, but congressional disputes over other budgetary areas continue. Have dollars for IT projects actually been released? Does the battle on the Hill about the shape of the subsequent budget mean you have to table IT proposals?

VOLGENAU: Yes, the defense budget has been approved and there is a substantial increase in 2003 compared to 2002; it's about 12 percent higher. But a lot of people don't realize that federal IT spending has increased every year for perhaps 20 years. The civil agency budgets are not approved yet. There's some delay there, but we aren't experiencing significant delay because of the lack of budget approval. Some programs, particularly [among] civil agencies, just have to continue. But we haven't been held up significantly by delays in the establishment of the Department of Homeland Security [or by other delays].

CRN: How many live contracts do you have now?

VOLGENAU: We have about 300 clients and 600 engagements. No single engagement for SRA is greater than 4 percent [of the company's annual revenue].

CRN: Some federal systems integrators tell me there is a new sense of urgency they have not seen before.

VOLGENAU: I think there is a sense of urgency in the federal government, particularly in regard to homeland defense. We do continuity of operations and prepare emergency plans, and we have done that work for so many years we can see the additions to our revenue that come as a natural increase in existing contracts.

CRN: What business opportunities are you seeking to develop as the Department of Homeland Security takes shape?

VOLGENAU: All of those agencies need emergency plans and plans for continuity of operations. Many of them need command centers. These are specialties of ours. They all need information security and critical infrastructure protection. They all need to find ways to share data among stovepipe systems from diverse sources, and we're quite good at that.

CRN: Which is your closest competitor, if any: GTSI, IBM Global Services or Lockheed Martin?

VOLGENAU: GTSI is more of a partner than a competitor. There are companies that are considered to be market-comparables: those people regarded as being like SRA because of revenue in the $500 million to $1 billion range and because they're doing some of the work we do. The companies we compete with are Northrop Grumman, SAIC, Booz-Allen Hamilton, Lockheed Martin, Computer Sciences Corp. Our win rate is about 80 percent of the jobs we bid. And we're prime for about 95 percent of our work.

CRN: With which vendors do you partner closely?

VOLGENAU: We frequently work with Microsoft because you have to work with them. So many government agencies use the company's products. The same is true for Oracle. And we have a good relationship with IBM; they have Tivoli, and we do a lot of Tivoli implementations. As far as hardware [sales], that would be all of the standard hardware companies,anyone from Dell to IBM to Sun.