Mostly classified Garland Raytheon unit turning to commercial fields

Jul 21, 2008 (The Dallas Morning News - McClatchy-Tribune Information Services via COMTEX) -- RTN | Quote | Chart | News | PowerRating -- It's hard to keep a $2.7 billion business with 9,000 employees a secret, but Raytheon's Garland-based Intelligence and Information Systems division comes pretty close.

The IIS division is essentially a technology outsourcing firm like Electronic Data Systems Corp. but does most of its work for the U.S. military and other federal agencies, providing tech support for computer networks, GPS satellites, unmanned aerial vehicles and other items for a variety of classified clients.

In fact, half of IIS' work is classified.

"We're basically an IT company for the government and intelligence community," said Michael Keebaugh, division president.

That may not be true for much longer, though, as the division is beginning an ambitious initiative to court commercial customers.

Analysts say there are opportunities, but also challenges that the IIS division generally doesn't have to deal with in the government realm.

Mr. Keebaugh said embracing commercial clients is a necessity because federal defense spending is slowing after the post-Sept. 11 surge.

"There's not that much difference driven by the political party in power," he said. "It's more driven by events."

IIS' revenue grew about 8 percent last year, which Mr. Keebaugh expects to be higher this year.

To boost sales, the division has made large acquisitions and plans more.

One area in which IIS hopes to take advantage of its military expertise is data security.

In the last year, IIS bought two firms -- SI Government Solutions and Oakley Networks -- that specialize in software security.

"If you look at the No. 1 threat for the 21st century, it's cyber-security," Mr. Keebaugh said.

But Ben Trowbridge, chief executive of Dallas-based Alsbridge Inc., which advises companies on picking outsourcing partners, said IIS could have a tough time making security the centerpiece of its commercial business.

"It's like eating crawfish," Mr. Trowbridge said. "It tastes good, but you better have some potatoes or you're going to starve."

Mr. Keebaugh acknowledged that many companies currently see data security as an "insurance policy."

But he said interest in the field will grow because identity theft and network penetrations are increasingly the domain of foreign governments and organized crime rather than bored teenage hackers.

Mr. Trowbridge said that even if the cyber-security arena doesn't take off for IIS, it has plenty of opportunities in the commercial field.

"I think they could be interesting in the space," he said.

But IIS will have to be a bit leaner and meaner than government customers typically expect.

In work with the military, the focus is on implementing technology to complete a mission, with a secondary focus on cutting costs or using standardized, interoperable platforms.

"Over a period of time, we've had to change our culture to become more competitive," Mr. Keebaugh said.

And there's plenty of competition.

Despite the high-profile purchase of EDS by Hewlett-Packard Co., the reality is that there are more options than ever for companies looking to outsource their IT functions, Mr. Trowbridge said.

"Five years ago, we probably had 150, 175 outsourcers in the database space," he said. "Now there are over 400. There's just a lot of competition in the space, both from India and onshore, lots of niche providers now."

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