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Systems Integrators Are Branching Out

Focus Is Shifting To Security, Health

By William Welsh
Special to the Washington Post
Monday, March 7, 2005; Page E04

The roster of players hasn't changed much, but it isn't business as usual in the state and local government technology market.

After several lean years of tight state and local budgets, some of the biggest systems integrators in the market say they are broadening their offerings to follow spending trends in transportation, homeland security, health care and outsourcing.

Top State and Local Contractors

These are the top systems integrators in the state and local government market based on estimated 2004 revenue from that sector:

More than $1 Billion

Affiliated Computer Services Inc. of Dallas

Electronic Data Systems Corp. of Plano, Tex.

International Business Machines Corp. of Armonk, N.Y.

$500 Million to $1 Billion

Accenture Ltd. of Hamilton, Bermuda

Deloitte & Touche LLP of New York

Maximus Inc. of Reston

Unisys Corp. of Blue Bell, Pa.

$300 Million to $500 Million

BearingPoint Inc. of McLean

CGI Group Inc. of Montreal

Northrop Grumman Corp. of Los Angeles

$100 Million to $300 Million

Ciber Inc. of Greenwood Village, Colo.

Covansys Corp. of Farmington Hills, Mich.

Computer Sciences Corp. of El Segundo, Calif.

Science Applications International Corp. of San Diego

Federal Sources Inc. of McLean compiled these estimates based on analysis of public documents and discussions with the companies and others in the market. Covansys Corp. was still auditing 2004 results when the data was compiled.

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Accenture Ltd. is expanding aggressively into transportation with smart-card and video technologies. The contractor recently proposed to the Los Angeles Metropolitan Transportation Authority an "e-ticketing" solution that would let commuters use a single card to pay for all modes of public transportation in the sprawling metropolitan area.

International Business Machines Corp. is eyeing Medicaid-related work in the booming health care sector. Northrop Grumman Corp.'s information technology unit intends to expand its footprint in the criminal justice arena.

The new CGI-AMS unit, created last year by Montreal-based CGI Group Inc.'s purchase of American Management Systems Inc. of Fairfax, is poised to tackle major information technology and business process outsourcing jobs in such areas as health care. Before the purchase, AMS didn't have the resources to compete for the big outsourcing deals, said Michael Keating, a CGI-AMS vice president. "What we can do now that we couldn't do before is bring heft," he said.

CGI, Accenture, IBM and Northrop Grumman typify many of the 14 companies on Washington Technology's 2005 list of top integrators in the state and local market. For the list, market research firm Federal Sources Inc. of McLean ranked companies by their estimated revenue from state and local IT services work.

Affiliated Computer Services Inc. of Dallas, Electronic Data Systems Corp. and IBM -- with more than $1 billion each in annual state and local revenue -- held their positions at the top of the list for the fourth straight year. Accenture could break the billion-dollar barrier next year, according to FSI.

Two companies that hit a new tier on this year's list are Maximus Inc. of Reston and CGI. Maximus moved into the $500 million to $1 billion category with Accenture, Deloitte & Touche LLP and Unisys Corp. Combining CGI and AMS pushed the new unit into the $300 million to $500 million category.

Ray Bjorklund, FSI's senior vice president and chief knowledge officer, said the list isn't likely to have newcomers any time soon. "There's a deep chasm between the big and small systems integrators in the state and local market," he said.

Many of the smaller integrators in the market have annual revenue of between $20 million and $50 million, a long way from the $100 million threshold to make the list.

The state and local market is expected to increase to $44.8 billion in 2005 from $42.3 billion in 2004, a 5.9 percent growth rate, according to research and consulting firm Gartner Inc. of Stamford, Conn. States are emerging gradually from a prolonged period of budget shortfalls that kept them from investing in system upgrades or business process transformation.

"As they begin fiscal 2006, most states will be in the green," said Rishi Sood, research vice president with Gartner.

William Welsh is a senior writer at Washington Technology. A complete report, with profiles of top companies on the state and local contracting list, can be found in Washington Technology magazine or online at www.washingtontechnology.com.

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