Federal IT is stable despite changes
- By Vandana Sinha
- Apr 15, 2003
Ernst Volgenau, SRA's founder and president
Ernst Volgenau says he's 'not the dynamic entrepreneur' who often figures in vendor success stories. When he started SRA International Inc. in 1978 in his basement, the Air Force retiree was the only employee. He pursued technical work, which has become the foundation of his government business.
Three weeks after starting SRA, Volgenau hired his first employee. By the end of that year, there were a half-dozen workers. Last year the Fairfax, Va., company had more than 2,400 employees and $350 million in revenue.
In the 1990s, someone jokingly suggested a penguin as a company mascot. 'It stuck,' Volgenau said. 'Penguins are innocuous creatures. On the surface, they're just floundering around, but when they dive, they're fierce predators. They catch a lot of fish.'
A Naval Academy graduate, Volgenau joined the Air Force in 1955 as a lieutenant, working on everything from space boosters and satellites to large-scale weapons systems and command structures. He retired in 1976 as a colonel, having earned a master's degree in electrical engineering from the Air Force Institute of Technology and a doctorate in the same field from the University of California at Los Angeles. He also spent two years as director of inspection and enforcement at the Nuclear Regulatory Commission.
GCN associate editor Vandana Sinha interviewed Volgenau at his Fairfax office.GCN: How hot do you think the government IT market really is?
VOLGENAU: The government IT market has been good for as long as I can remember. It's a little bit better today than in the past, but it's always been pretty good. It's certainly receiving a lot more notice now. The current growth rate is probably in excess of 10 percent.
We can cite figures from various sources that the IT associated with national security has probably been growing faster than that, though it's very hard to measure. When I say 11 percent per year, that's for government IT in general and doesn't include IT for intelligence agencies or for computers that are part of weapons.GCN: How do you think the industry will look in five years?
VOLGENAU: I think even five to 10 years from now, government IT spending will increase. It has risen nearly every year for the past 20 years, and I've been involved in government computer systems longer than that.GCN: Where is your main government business?
VOLGENAU: This year we are projecting government revenue in the $420 million to $430 million range. That excludes [recently acquired] Adroit Systems. Last year, roughly $350 million of our revenue was in the government sector. The year before, it was roughly $300 million.
We've always worked for the Defense Department. National security, which includes not only DOD but intelligence agencies and the Homeland Security Department, represents about 55 percent of our revenue. Civil-government systems are just under 30 percent, and health care and public health just under 20 percent.GCN: When the commercial sector comes back, how will that affect the government IT market?
VOLGENAU: It's very hard to estimate what the stock market is going to do. In my view, in the 1990s the stock of companies like SRA was undervalued substantially. Now some people say it may be overvalued. But we are not preoccupied with stock price. If we build the value of the company for customers and employees and shareholders, I think the stock market will generally treat us well.
In my view, government's going to continue to be a good market for the future. So if the commercial IT companies come back, and the investors flock to them, it won't make our market any less good than it was before.GCN: How do you respond when people say the government IT market is growing too fast, beyond its value?
VOLGENAU: There are all types of theories on that, as to what growth rate or profit one must sustain. But I've long since learned, in this business, there's no single quantitative measure that can predict the future.
In retrospect, the prices for Internet companies in the late 1990s were too high. But at the time, people were talking about a paradigm shift in our economy, and the reasoning sounded logical.GCN: What agency buying trends are you seeing?
VOLGENAU: Critical infrastructure protection and improving Internet security are very important. Information sharing across stovepiped systems is significant. Closely related to that is knowledge management. Even if you can share information across stovepiped systems, how do you analyze it? That brings up the whole issue of how you manage the extracted information.
Data mining and text mining are important, and of course all the aspects of national security: surveillance, reconnaissance, command and control.
Critical infrastructure assurance involves not only the software for such things as virus protection, but also making sure your facility is protected physically.
In information sharing, there are various techniques. You can't completely redesign large stovepiped systems. But you can, for example, extract data from a system owned by one agency but important to another agency. You can agree to keep up a kind of database without interfering with the individual agency systems.
Then there's other software that is intended to try to get into various operating systems and various program code and various database systems. Once you get at the information, there's so much of it that being able to go through and make sense of it is very important business intelligence.GCN: How will the war in Iraq affect government IT buying trends?
VOLGENAU: No one likes war, although there will probably be more spending on command and control, surveillance, reconnaissance and logistics. You have to cut back in other parts of Defense and civilian agencies to afford the war.
It seems obvious that the use of drone aircraft to fight terrorism all over the world will grow in importance. You can fly unmanned aerial vehicles for hours and hours over an area to look for enemies or terrorists and not endanger pilots.
You've got to include the war on terrorism with the war on Iraq. If fear subsides because we seem to be winning, then there may be more money spent on other important areas such as health care and public health, and certainly on civilian government systems that need work.GCN: What do you do for civilian agencies and health care organizations?
VOLGENAU: We have contracts with the National Institutes of Health to support their network. We also expedite the approval of drugs for the Food and Drug Administration. And we do health work for the Health and Human Services Department. For example, we designed, built and operate the National Practitioner Data Bank, a repository of adverse actions against health care professionals and organizations.
The intent is to keep physicians from harming patients in one state and then going to another state and harming others. That's a small percentage of doctors; but when it happens, it's serious.GCN: How do you think the Homeland Security Department will affect government IT?
VOLGENAU: We've had work for many years with some of the homeland security organizations, such as the Federal Emergency Management Agency and the Coast Guard. For several years we supported the Critical Infrastructure Assurance Office and other agencies, such as the Customs Service and the Immigration and Naturalization Service. Also, we are a subcontractor to Unisys Corp. on the Transportation Security Administration's IT infrastructure.
If I were head of the department, I would be very concerned about information sharing. They have some experienced people, and I'd be surprised if they weren't thinking about that. They're also going to be concerned about information sharing with the FBI and intelligence agencies.GCN: SRA has made some prominent hires from government agencies over the years. What is your recruiting strategy, and are there agencies you prefer?
VOLGENAU: We make strategic hires from agencies. The reason is, you've got to understand the business of the clients. It's not enough to be a good technology company, you've got to know your users' needs. Our hires attempt to give us an understanding of our clients' business processes.