Profile trio of the No. 1 company, fastest grower and list newcomer
1. TOP-RANKED COMPANY: EDS
Perhaps the first hint that EDS (VARBusiness 500 No. 1) had good karma on its side came last February when the IT outsourcing giant won back the lion's share of the General Motors' contract it had owned exclusively for a decade, until GM put its $3 billion project out to bid in 2005. Then came Kraft Foods, which Plano, Texas-based EDS signed for $1.7 billion, its most lucrative contract to date in the retail consumer-goods industry. The win list continued from there: In 2006, Bank of America hired EDS for $700,000, and U.K.-based Vodafone entrusted EDS with a sizable chunk of its applications restructuring project, a deal EDS chairman and CEO Michael Jordan worked on personally and cites as a highlight of the year.
All told, EDS experienced its highest rate of contract signings--$26.5 billion--since 2001, including a 50 percent increase in its applications business alone. The outsourcing giant doubled net income for the year on sales that jumped 7 percent to $21.3 billion. It's all part of an ongoing corporate turnaround that, after several years, appears to be reaching its zenith. But no one...especially Jordan, is resting on his laurels.
"We're pleased with the progress we've made as a company, but we're always looking ahead and saying the road looks tougher," said Jordan in an interview last month with VARBusiness.
Tough road or not, EDS is a company on the move, well deserving of its spot atop the VARBusiness 500. Under Jordan, EDS has climbed itself out of the doldrums of the mid-2000s and begun reinventing itself in clear acknowledgement of today's global market and economic realities. Chief among the changes is embracing offshore development in India and other locations. On the downside, that's meant nearly 5,000 employee layoffs in the United States but has led to nearly as many hirings overseas and enabled the company to offer high-value IT services at lower cost.
EDS is also reorienting its traditional IT outsourcing business around more sophisticated, higher-margin apps such as SAP and Oracle, as well as infrastructure and business process engineering solutions. It's diving deeper into industry verticals, while undergoing an internal revamping of standards, metrics and procedures aimed at boosting customer satisfaction.
For the 45-year-old company that more or less pioneered IT outsourcing as a business model, such changes amounted to one long look in the mirror, Jordan said.
"One of the things we did was look critically at all of our businesses," Jordan says. "It was a matter of us deciding what it takes to get back on top of the game."
A 'Best Shore' Approach
Jordan attributes much of EDS' successful turnaround to his No. 2, Ron Rittenmeyer, whom he promoted to president and COO last year. Rittenmeyer, an EDS veteran, has spearheaded a number of strategic initiatives while cutting $1 billion in operational cost from the company ledger. His notables include leading the move to "best shore" delivery of goods and services. In EDS parlance, best-shoring involves a combination of outsourcing operations that take place stateside, near-shore and offshore, and are delivered to customers based on what's best logistically and from a cost perspective.
Last year, the company opened best-shore centers in Eastern Europe and Argentina to augment its existing operation in India. Through the purchase of MphasiS, which specializes in business process outsourcing and other high-end services, EDS added 20,000 employees to its India operations. All told, EDS is four times as big now as it was a year ago with its offshore businesses, Rittenmeyer says.
The transition, however, hasn't been easy.
"This was a cultural change that was significant and not without its struggles," Rittenmeyer told VARBusiness last month. "It's something that's becoming crucial to the company, now that we have 45,000 people in best-shore locations."
That workforce explosion has been tempered by the fact that EDS made layoffs here at home and created some challenges in learning to effectively manage such a diverse and decentralized staff, Jordan acknowledged. "Dealing with the employment fallout and changes is always hard for any organization," he said. "But we did it."
NEXT: How EDS plans to move up the applications stack.
Through one of its major initiatives, EDS aims to gain a stronger foothold in the market for managing higher-value applications and business process-related services. The company's bread-and-butter business traditionally has been managing its primarily multinational enterprise customers' desktop and file/print environments, a highly competitive space, but one that's been beset by commoditization. By revitalizing its business around running back-office applications such as SAP and Oracle, as well as providing business process outsourcing capabilities, EDS can provide services with a much higher degree of complexity and value--at a better return rate.
EDS grew its applications business by 50 percent last year and, as part of that effort, expanded its industry expertise to better understand the particular applications needs of any one vertical, Jordan said. Modernization of legacy applications and the implementation of service-oriented architectures (SOAs) have driven demand for EDS' services.
"Having to deal with complex legacy environments, with their embedded databases, has led to real growth in SOA for us," Jordan said. "If there's a major emerging technology, it's the work we're doing to use SOA to streamline a customer's environment."
Finding a way to differentiate your services business--high-end apps being one such service--is key to success in what's fast becoming a cutthroat market, says Ken Presti, analyst and president at Presti ResearchConsulting in Sunnyvale, Calif. The other key ingredient, one that EDS put a premium on in 2006, is understanding customers' unique business needs, then executing a technology and services plan that serve them well.
"It's not enough to go golfing with the head guy [at the client site]. You have to get at the level of people using the technology, see how they interact with it, what they need," Presti says. "Then you devise a plan for solving their problems."
Keep On Keepin' On
Now Jordan wants to drive demand for EDS' infrastructure business and pursue operational efficiencies, better customer service and higher-quality solutions. The apps business remains front and center, as does entry into business process outsourcing markets around health care, financial processing and other verticals.
Then there's the M&A strategy. Jordan says EDS wants to augment organic growth by building on its acquisitions of MphasiS and Global Enterprise Management Solutions, or GEMS.
Ultimately, Jordan's main concern is the customer. "We've tried very hard to be more responsive to client needs from a day-to-day standpoint and from a service quality standpoint," he said. "For that, we're getting some recognition in the market."
So much recognition, in fact, that the company landed in the top spot on the VARBusiness 500 list.
NEXT: The VARBusiness 500's fastest grower.
2. FASTEST GROWER: PRESIDIO
It's all about the network for Presidio Networked Solutions (VARBusiness 500 No. 72). More specifically, it's about the deep technical expertise needed to design, develop and deploy networks. IT managers may fret about their databases, transaction processing systems and desktop software. "But those applications are only as good as the efficiency and security of the network they run on," says Joel Schleicher, CEO of Presidio.
That focus--and a few acquisitions--fueled Presidio's 222 percent revenue growth in 2006, making it the fastest-growing independent solution provider on this year's VARBusiness 500 list. (MetaSolv, which recorded 259 percent growth in 2006, was acquired by Oracle in December for $219 million.)
Greenbelt, Md.-based Presidio is the sum of many parts. Last year, it acquired Solarcom, a Norcross, Ga.-based solution provider that also operated Solarcom Capital, a finance and leasing business, and Atlantix Global, a purchaser, refurbisher and reseller of used IT equipment. Earlier, Presidio, then known as Integrated Solutions, bought solution providers Networked Information Systems and Ficomp. Today, Presidio Networked Solutions is the largest component of the Presidio Inc. parent company and includes its network and system design and implementation services. Solarcom Capital and Atlantix Global run as subsidiaries.
|Presidio CEO Joel Schleicher: "Applications are only as good as the efficiency and security of the network they run on."|
As Schleicher describes it, the company is "a Cisco-centric provider of infrastructure solutions to the enterprise," complemented by technology from IBM, Sun, Hewlett-Packard and other IT vendors. Presidio's growth is being driven by demand for unified communications, VoIP and converged voice/data solutions, as well as by sales of network storage, security and wireless systems. More recently, the company has expanded into system hosting and monitoring services. Even without the acquisitions, the company's core business has grown 18 percent each year for the past five years, Schleicher says.
Some 40 percent of the company's employees are engineers who excel in developing and deploying "highly complex solutions," according to Schleicher. But with everyone trying to recruit such experienced engineers, "the big problem is finding enough," he says. In order for Presidio to hit its growth targets during the next three years, the company must increase its workforce by 50 percent, he says.
NEXT: A newcomer to the VARBusiness 500.
3. NEW TO THE LIST: FISHNET
Gary Fish keeps a Post-It note on his monitor with one word written on it: "Overcommunicate." That's one of his mantras--to keep staffers in the loop--as his company, FishNet Security (VARBusiness 500 No. 186), grows into a big fish in the security pond.
What started in 1996 in a basement has grown into a $139 million company with 50-plus vendor partners. Those manufacturers, including security bigwigs Check Point Software Technologies, Secure Computing and Blue Coat Systems, give FishNet glowing reviews, citing the Kansas City, Mo.-based VAR as one of their best and brightest.
As far as Check Point's Mike Valkar is concerned, FishNet has a big-business mentality and makes no bones about it.
"A lot of VARs out there treat themselves as small businesses," says Valkar, area manager for the Midwest at Check Point. "They have an owner, an accountant and a sales team. They don't have the internal mechanisms in place to work as a company with all wheels spinning at once. FishNet has a clear management hierarchy--a controller, a CIO. They have the structure they need to achieve their goals."
Just last month, San Jose, Calif.-based Secure Computing honored FishNet with its National Partner of the Year Award. Vendor execs say the partnership with FishNet has yielded sales growth of 50 percent year-over-year for Secure Computing.
"They have a national range and reach for sales and support that's unmatched by any other VAR," says Jay Chaudhry, vice chairman at Secure Computing. "Also, their focus on security has provided them deep expertise."
|Gary Fish is looking for more fast swimmers to complement his company's portfolio.|
And FishNet's been nothing if not consistent; in fact, the VAR's been on a roll since the very beginning, growing revenue organically about 38 percent year-over-year since its inception. Now Fish is concentrating on spackling--filling holes in the company's knowledge base and geographical coverage area.
The VAR put down a stake on the West Coast last March when it bought SiegeWorks, a security player specializing in application security, and established an office in Livermore, Calif. Several months later, FishNet bought Virginia-based True North.
Fish is still casting his nets, looking for more fast swimmers to complement the VAR's portfolio. Target companies will be security specialists in areas where FishNet's presence is minimal. Also, he's getting ready to launch a managed service practice and eyeing niche markets that "touch the applications we're securing," Fish says.
For now, that's a lot of fish to fry.