Fairfax's AMS Sets Sights on Outsourcing
By Anitha Reddy
American Management Systems Inc.'s chief executive, Alfred T. Mockett, told investors and analysts yesterday that he is restructuring the company to make the most of the fast-growing outsourcing business.
The Fairfax-based company plans to create a division devoted solely to performing back-office functions for organizations by the end of next year and more than double revenue from outsourcing -- what AMS calls its "managed services" -- to $150 million from $70 million this year.
"Clearly, the greatest opportunity is in managed services," Mockett said yesterday at an investor conference in New York. For AMS, he said, the opportunities were even greater in managing information technology for government agencies. The federal market for outsourced services was $6.5 billion last year and is expected to grow rapidly, he said.
To cut costs and support the new effort, the company also will combine its software-engineering operations into a single unit early next year and will rely more on foreign workers.
Expanding offshore software development is a priority, Mockett said, because it's cheaper. The company said it will quadruple the size of a development center in Krakow, Poland, to 200 people next year.
"We've been a little late to the game in offshore software development," Mockett said. "Believe me, we are making up for lost time."
AMS said it will expand managed services through acquisitions as well as internally. Mockett said he hopes revenue from outsourcing will rise to one-third of total sales by 2006. Managed-services revenue accounted for less than a tenth of AMS's $987 million in revenue last year, according to its annual report.
Richard Stice, an analyst with Standard & Poor's Equity Research Group in New York, said the plan to increase managed-services revenue "was an appropriate decision given the market conditions." He said pricing pressure and increased competition has made AMS's traditional technology consulting a difficult business in recent years, and outsourcing has more growth potential.
Mockett has overseen cost cutting and streamlining during his three years as chief executive, while trying to identify new growth opportunities. AMS recently bought a Reston-based firm, R.M. Vredenburg & Co., which serves the intelligence agency.
Washington Post
American Management Systems Inc.'s chief executive, Alfred T. Mockett, told investors and analysts yesterday that he is restructuring the company to make the most of the fast-growing outsourcing business.
The Fairfax-based company plans to create a division devoted solely to performing back-office functions for organizations by the end of next year and more than double revenue from outsourcing -- what AMS calls its "managed services" -- to $150 million from $70 million this year.
"Clearly, the greatest opportunity is in managed services," Mockett said yesterday at an investor conference in New York. For AMS, he said, the opportunities were even greater in managing information technology for government agencies. The federal market for outsourced services was $6.5 billion last year and is expected to grow rapidly, he said.
To cut costs and support the new effort, the company also will combine its software-engineering operations into a single unit early next year and will rely more on foreign workers.
Expanding offshore software development is a priority, Mockett said, because it's cheaper. The company said it will quadruple the size of a development center in Krakow, Poland, to 200 people next year.
"We've been a little late to the game in offshore software development," Mockett said. "Believe me, we are making up for lost time."
AMS said it will expand managed services through acquisitions as well as internally. Mockett said he hopes revenue from outsourcing will rise to one-third of total sales by 2006. Managed-services revenue accounted for less than a tenth of AMS's $987 million in revenue last year, according to its annual report.
Richard Stice, an analyst with Standard & Poor's Equity Research Group in New York, said the plan to increase managed-services revenue "was an appropriate decision given the market conditions." He said pricing pressure and increased competition has made AMS's traditional technology consulting a difficult business in recent years, and outsourcing has more growth potential.
Mockett has overseen cost cutting and streamlining during his three years as chief executive, while trying to identify new growth opportunities. AMS recently bought a Reston-based firm, R.M. Vredenburg & Co., which serves the intelligence agency.
Washington Post
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