Northrop Rises In IT Rankings

State and Local Unit Growing

After Northrop Grumman Corp. finished a series of acquisitions to build a $10 billion federal information technology operation, the company found it also had a substantial state and local business.

The business -- worth about $400 million -- was scattered in pieces around the company, none of which was making much of an impact on the market. That's changed.

In 2004, the Los Angeles-based company pulled together what once had been parts of Litton PRC Inc., Logicon Inc., TRW Inc. and other companies. Northrop Grumman's state and local business, which now operates under one roof in Herndon, has won three major outsourcing deals in the past 18 months, helping it to climb a notch on Washington Technology's annual Who's Who list of the top state and local systems integrators. It now is among companies with $500 million to $1 billion in annual revenue from systems integration for state and local government, the second-biggest category in the ranking.

Northrop Grumman's advance is most visible in its two largest 2005 wins: a 10-year, $2 billion contract to revamp and run Virginia's outdated IT infrastructure and a seven-year, $667 million contract to run San Diego County's IT and telecommunications capabilities.

"If we were the stealth IT company in state and local, that is no longer the case," said Cheryl Janey, vice president of business development and strategy for Northrop Grumman's commercial, state and local group.

The state and local government market is smaller than federal IT spending, but it is growing faster. Like Northrop Grumman, other companies are moving quickly to pursue lucrative opportunities.

For the fifth consecutive year, Electronic Data Systems Corp., International Business Machines Corp. and Affiliated Computer Services Inc. maintained their positions atop Washington Technology's Who's Who list. Each company has more than $1 billion in annual state and local revenue.

In the second tier, with $500 to $1 billion in revenue, Northrop Grumman joined Accenture Ltd. of Hamilton, Bermuda; Deloitte Touche Tohmatsu of New York; Maximus Inc. of Reston; and Unisys Corp. of Blue Bell, Pa.

Market research firm Federal Sources Inc. (FedSources) of McLean compiled the list and ranked systems integrators by their estimated revenue from state and local IT services work.

Analysts predict that the state and local IT market will pick up momentum over the next 12 months as states, flush with cash from a better fiscal year than anticipated, grow more ambitious than in the recent past.

State and local IT spending is expected to grow at a rate of 7.5 percent annually, from $47.3 billion in 2006 to $58.8 billion in 2009, according to the Stamford, Conn., market research firm Gartner Inc.

The one potential speed bump could be November's state and local elections. Some projects that had been delayed for years as states waited for their budgets to rebound could be held up again while state leadership positions are determined, industry analysts said.

One of the first large requests for proposals for this year is expected from the Texas Information Resources Department for data center consolidation and operations, anticipated to be worth at least $500 million over five years, according to FedSources.

Ethan Butterfield is a staff writer with Washington Technology. For more of this special report go tohttp://www.washingtontechnology.com.