CSC Has a Lock On Government Business

As a result of that new business climate, Pat Ways was recently promoted to president of business development for CSC's federal sector business unit. In that role, he'll oversee new business in every niche of government business, from relatively low-key agriculture systems to IT innovations making headlines in the war on terrorism.

Ways joined CSC in 1992, after spending more than 27 years with IBM's federal systems division, where he had senior-level responsibility for projects for the Department of Transportation (DOT), government/regulatory banking agencies and civil-aviation authorities worldwide. VARBusiness recently spoke to Ways, who discussed how the establishment of a new Homeland Security Department and other recent developments translate into opportunities for fast-responding vendors, resellers and integrators.

VB: CSC's federal business unit has no formal VAR program. But resellers are keenly active in your pursuits with U.S. government agency customers, right?
Ways: Yes, roughly 50 percent of our business is subcontracted out to VARs, integrators or integrator/product companies. For example a CSC-led alliance recently won a multibillion-dollar outsourcing contract with a major U.S. intelligence agency. That alliance included a consortium of 50 small businesses, many of which could be considered VARs.

That said, we don't have a formal VAR program. We consider ourselves an opportunity-driven company: We go out, we find the contract opportunity, and we go get it. We put together the best overall solution for the client. If that solution calls for a VAR, then we will use one. If it's a seat-management contract, for example, we might well have the opportunity to provide desktops, software and all the other needs of the government customer. We wouldn't necessarily manage those assets and products. Instead, we could go to a VAR,if not a large-scale government reseller, then a smaller business. Whichever businesses we partner with, they go out and procure the software and the hardware. In some cases, they continue to own it and then lease it to the client. They do the asset management.

I see an average of five companies like these every week. You'd think after 10 years, I'd run out of companies. But I haven't. Most of the resellers I see ask me "How do I do business with CSC?" I'm happy to go over with them their strengths, niches and get a general sense of where they want to go. I like to find out which agency clients they'd like to serve. From there, I'll tell them what we're doing with, say, NASA or the EPA, and get them in touch. It's an opportunity-based system, not a general program for resellers. But these companies are critical to what we do with the federal customer.

VB: Do you foresee implementing a formal reseller program anytime in the future?
Ways: Well, I never say never. But it's not in our business model right now. I don't see us changing the opportunity-driven system in the near future. It has worked well for us. We have a pipeline of some $26 billion in opportunities within the next 30 months. The companies we work with need to call on us and have us bring them on board.

VB: Fair enough. Let's get into the nuts and bolts of President Bush's proposed Homeland Security Department. Datasharing is the buzzword there,it's all we ever hear about. How big of a growth opportunity will this be?
Ways: I wouldn't underestimate how significant this is, within the context of how everything is changing post-9/11. In fact, we've formed a new vertical organization because of it. We call it our Enforcement, Security and Intelligence unit. We've merged services [formerly provided separately for both civil and defense customers. Many of the agencies affected by the proposed Homeland Security Department are now customers of the new group, including intelligence agencies like the CIA and the National Security Agency, and law enforcement agencies like the FBI and INS. So, we now have three verticals for the fed sector: the new one, which addresses the needs of federal security, law enforcement and intelligence agencies; our defense group, which supports all aspects of the DOD not included in the new unit; and our civil group, which works with the remaining civil agencies.

One reason we did this was the wealth of discussion about sharing data among the agencies and the first responders, especially when it comes to terrorist threats. Information-sharing is a systems-integration challenge; it's what we do for a living. We wanted to focus our capabilities here in one group to better go after these opportunities and better serve our clients. As with our other efforts, there will be ample opportunities here for our partners' participation. Look, it's clear how vast and widespread the opportunities will be. The proposed Homeland Security Department would need some kind of new enterprise architecture as well as the infrastructure to implement it and deal with the integration challenge I mentioned earlier. That represents a tremendous opportunity for subcontractors to provide hardware through us as we put together and then implement high-level solutions.

We're also seeking a lot of companies with niches in biometrics: fingerprint technologies, explosive sniffers and facial-recognition technologies. We need those kinds of people right now to fulfill the needs of homeland security. Then there are the cybersecurity companies whose products we'd like to work with. The security of our systems has been a concern for quite some time at the federal level,defense agencies have been pursuing this aggressively for years. Now, civil agencies are really coming into their own with this in the past year or so. They need to play catch up.

VB: CSC is also watching developments with bioterrorism, as well. On which fronts?
Ways: The Department of Agriculture is very much involved with terrorism. Animal and plant inspections now need better systems-management to protect the American population from poisoning efforts, or someone doing something with our livestock to spread mad cow disease. There will be increasing needs there when it comes to IT. We're doing a project with the Centers for Disease Control (CDC) that involves information systems for infectious diseases. We were doing this six months before the anthrax situation. But, obviously, it took on a greater significance after that, with respect to attention and visibility.

VB: There's crossover demand, too,a natural spillover segue into establishing long-term sales relations with the state/local government customer. Can you provide an illustration?
Ways: Sure. These programs, like the one with the CDC, have a great deal of applicability to the state and local governments. They're dealing with the same kind of problem. There's a great need for coordination and communication on all levels of government when it comes to infectious diseases. The first level of response is most often on the state or local level,the National Guard or local fire departments, for example. And every state has its own version of the Federal Emergency Management Agency that responds as well to these kinds of crises. There's a further need for information-sharing and IT-systems architecture services because of that.

VB: Training appears to be a continued demand of government as well. Outside of the $86.8 million DOD contract, how are you addressing those needs?
Ways: We have a training center of excellence in Hampton, Va. We use them across all levels of the federal government to do course development, remote training and fulfill other needs. These are often opportunities embedded in current programs. We have a contract with the Veterans Administration, for example, where the provision of IT training is part of the contract. Now, these jobs are getting bigger. The National Transportation Security Administration (NTSA) just announced a $50 million training job for all the screeners in the airports. Usually, training is a $5 million to $10 million job. It's an important part of everything we do. It's a core competency, but also one that we'll occasionally subcontract out.

VB: It's not all about security, obviously. What are the key developments in e-government that you're seeing?
Ways: The Office of Management and Budget (OMB) has come up with 24 e-government initiatives. Essentially, there are lots of government entities that do the same things, but use different systems to do it. I'll illustrate with a hypothetical example: You could have 19 agencies out there doing grants. They each do it in their own format, even if the information needed is essentially the same. The OMB is saying this is ridiculous. They want the portfolio managers to transform what they do via e-government, and to do it consistently throughout all the agencies. They want to avoid duplication efforts in their programs. But it's not just about grants. It could also be related to payroll or mapping with GIS systems.

VB: And the aging of IT systems remains another big growth area, with respect to both enterprise integration and services.
Ways: Right. Enterprise integration and outsourcing are important areas of focus for us. There's going to be major fallout in government, both from the aging systems as well as the aging talent. Much of the equipment is out of date, and many of the people who run it are looking at retiring. We expect those agencies to increase the frequency with which they turn to us for support because of this. Agencies know they need to change, they need to modernize, and they need to reorient their business processes. IT outsourcing and enterprise-integration programs are change agents. They want a single private-sector partner to help provide the technology they need to effect that change. They want a partner with long-term experience in a variety of agencies. And they want a partner who can craft a solution at the organizational level and then implement it for them. In doing so, integrators such as CSC can turn to the broadest possible set of potential vendors, VARs and other teammates to pick and choose the best team to meet an agency's needs. And with the kind of ramp-up in infrastructure that these large transformational programs demand, there will be plenty of opportunity for VARs and other potential subcontractors that deal in hardware and other products.

VB: We thought outsourcing would be yesterday's "next new thing" by now, but that's not the case, right?
Ways: Actually it's a key growth factor in the federal market. While the commercial world has been doing this for 10 years, the government is just getting into it. The way it works is that we will own a facility, equipment and/or other assets that make up a customer's IT infrastructure. We then deliver services and operate infrastructure for them on a fee basis. That way, the customer can focus on its core mission and leave the support to us.

And we see plenty of new outsourcing opportunities on the horizon. HUD is just starting to [bid out its outsourcing contract. The EPA is looking to outsource its data centers. The NTSA, too. We currently have a contract with the Department of Education to run data centers for them at our own site and provide it to them on a fee-for-service basis. Three or four years ago, you saw very little opportunity in government outsourcing. Now, you're seeing the beginning of the growth curve here. You're talking opportunities from a half-billion dollars on up.