Combining products and services

Computer Associates International Inc., known chiefly as a software vendor, has posted big revenue gains in services sales to the federal government.

The Islandia, N.Y.-based company racked up the highest technology services growth rate for fiscal 2001, according to Eagle Eye Publishers Inc. The firm reports that Computer Associates had $118.7 million in services revenue in fiscal 2001, a 479 percent increase from the previous fiscal year.

But although Computer Associates' gains are dramatic, the factors behind the expansion are more mundane and include no big acquisitions or government mega-contracts.

Instead, the company attributes the growth in services sales to its solid products business. "As product-set sales increase, we see an increase in service revenue associated with that," said Pete Scalone, area manager for Computer Associates' Federal Division.

The federal group's product-centric service push is in keeping with the company's corporate philosophy. "During fiscal year 2001 [which ended March 31 for Computer Associates], the company refocused its services operations, specifically on engagements involving the company's products," according to Computer Associates' 10-K filing with the Securities and Exchange Commission.

Products that have led the company's charge into the federal sector include the Unicenter enterprise management suite, eTrust security tools and CleverPath Portal software. And this year, Computer Associates is seeing increased federal interest in its BrightStor storage products.

But there's more at work here than a rising product tide lifting the services boat. Scalone said Computer Associates has made an effort to "get the sales force more focused on solution selling." That means going to federal customers with a project plan that covers services as well as products.

Ray Bjorklund, vice president of consulting services at Federal Sources Inc., has also noticed the trend in product suppliers delivering more services to clients, and federal customers are asking them to do so. Customers "are going to get the contractor to help them and not just dump products at the door," he said.

Government agencies may not have sufficient staff to install products and may want to keep the vendor on hand to make sure nothing goes awry, Bjorklund said. In addition, agencies that have service relationships with product suppliers are in a better position to resolve problems should they discover a defect after a product is installed. "Having an ongoing service contract makes it easier for the government to work with the vendor," he said.

Computer Associates' typical arrangement consists of installing a product and then training employees in how to use it. Scalone's federal group can draw on the resources of Computer Associates' services and education groups to accomplish this.

But the company also offers customers the option of paying to have a Computer Associates' expert available for a set amount of time. Similarly, the company may provide a subject matter expert to lend a hand with project management chores.

Computer Associates' services foray boils down to helping customers install and learn about the products they buy. That's a fairly subtle approach for a company that once tried to acquire Computer Sciences Corp.