Big Blue comes back

Three years ago, IBM Corp. was viewed as little more than a personal computer and hardware provider to the federal government. In fact, some folks thought the mammoth information technology vendor had withdrawn from the federal scene altogether after it sold its IBM Federal Systems division in 1995.

Besides, the unit was known more as a systems integrator delivering complex aerospace solutions to the federal market, much like Lockheed Martin Corp., than as a provider of a broad range of value-added IT services to federal agencies.

IBM clearly needed to breathe new life into its federal group to meet the growing demand for value-added services that combined consulting, platform-independent IT and ongoing systems support as agencies moved to upgrade their IT infrastructures.

Looking at the results of the General Services Administration's Schedule 70 sales, IBM is back. GSA reported that the company rang up $313.7 million in fiscal 2001 sales on the schedule, up 25 percent from fiscal 2000. That amount earned the company second place on the GSA IT schedule list this year.

"The federal market has shifted over the last several years. Every agency is looking at modernization as a business mission," said Anne Altman, managing director of IBM Federal.

To that end, IBM officials moved to "mirror our customers' way of doing business," she said. The company invested in building a team of experts from federal agencies who know the federal government and are knowledgeable in crucial areas such as logistics and financial management.

IBM's federal unit also was able to piggyback on the transformation of its parent company into a global provider of services and systems integration, added Altman, a 21-year IBM veteran who has headed IBM's federal division for the past two years. IBM, which was nearly undone by the PC revolution of the 1980s, lost almost $5 billion in 1992, the largest loss at the time for an American corporation.

However, Lou Gerstner, IBM chairman, who was hired in 1993 to save the ailing company, halted plans to break the company into pieces, cut jobs, instituted cost controls and sold low-margin business units. The company focused on its strongest products and services, and as a result, IBM's $35 billion Global Services division is the largest of its kind.

IBM's successful transformation and modernization efforts helped win crucial government contracts, Altman said. In April, for example, the Defense Department awarded IBM a contract valued at $100 million to streamline DOD's complex matrix of more than 1,000 financial management systems.

Since IBM, a $90 billion company with 300,000 employees worldwide, revamped its financial management system, Defense officials were confident that the company could handle a large-scale modernization effort on the scale required by DOD, Altman said.

Other significant wins during the past year include contracts to provide the Navy with an enterprise resource planning infrastructure and the Agriculture Department with an e-procurement system. Now, federal agencies are dealing with issues such as data center consolidation and application reduction — all areas that IBM has tackled internally, Altman pointed out.

To drive home the message that IBM Federal is here to stay, the company increased its advertisement and media presence and strengthened its ties to Capitol Hill.

For example, IBM lobbied Congress to allocate money for the Customs Service's billion-dollar IT modernization program. Altman has also testified before Congress on issues such as e-government and homeland security.

"Government has always been a priority for IBM, yet the company's advertisement, communications and media relations didn't represent our accomplishments in the language of our customers," Altman said. Not until now, that is.