Federal Budget Cuts Encourage a Niche Business
With the nation facing a new atmosphere of austerity and mandated budget cuts, now would seem to be the absolute worst time to target the federal government for defense-related technology contracts. Yet, for one business, tight government funding is more of an opportunity than a challenge.
After all, the Pentagon faces two massive fiscal challenges. The first is the new lean approach to defense spending following the U.S. military’s withdrawal from Iraq and its preparation to draw down forces from Afghanistan. The second deals with today’s complex political realities. Unable to fashion a bipartisan spending plan, Congress has allowed the process known as “sequestration” to kick in. Those automatic budget cuts are expected to take more than $40 billion out of Defense Department spending this year alone for a reduction of more than 7 percent.
And yet, Timothy Coffin is all smiles as he prepares to pick up more federal information technology contracts. A former U.S. Air Force officer, Coffin serves as president of iGATE Government Solutions, a wholly owned unit of information technology provider iGATE Corporation. As Coffin sees it, the era of tight Pentagon budgets actually provides a great growth opportunity for a contractor that understands the overarching theme of today’s spending environment.
Facing both financial and political headwinds, federal agencies have to take a more creative approach to managing their programs and cash flows. That means they no longer can continue to rely on the same old approaches that have served them for decades.
“I am pretty excited about some of the opportunities I see,” Coffin says. “I’m not going after the $10 million opportunities; I’m going after the $100 million, $200 million opportunities, and we’re getting quite a bit of interest from the government in what we consider our value propositions.
“You know, the whole [new] contracting model is an educational process for the government,” he explains. “But when you come into a contracting officer and say, ‘Hey, we’re willing to take more risk and you only have to pay us when you get the result you want,’ they’re actually starting to listen.
“I think sequestration and so many challenges in the budget have actually made our message more palatable. The agencies are being forced to look beyond ‘business as usual’ to new ideas, and that actually has been a very positive thing for the direction we’re heading in,” he declares.
Coffin, 46, assumed his role in May 2012 when iGATE refocused its disparate government programs into one overall unit. As unit president, Coffin is responsible for sales to federal defense and civilian agencies as well as state and local governments.
The parent company is a global information technology services firm that last year had sales of slightly more than $1 billion. iGATE reported 2012 profits of $97.2 million, roughly an 88 percent increase from the previous year.
Headquartered in Fremont, California, iGATE is at heart a provider of technology outsourcing services with a large operation in India. It is on a major growth track as the parent company seeks to triple sales to $3 billion by the end of 2017. So if Coffin’s government services unit hits just half the parent company’s projected growth rate over the period, he would be looking at annual sales increases of about 16 percent.
A graduate of the U.S. Air Force Academy, Coffin indicates that concerns about sequestration have hidden a key fact about the focus of his business. Information technology spending actually is one of the bright spots in the federal contracting community.
“I think the rate of increase won’t be as great as it used to be, but if you look at the 2014 budget for [information technology] spending, it’s actually going up,” Coffin says. “From my perspective, when you look at the traditional way the government does business, many times it is a cost-plus or a [time and materials] model.
“They’re bringing in companies to do things on a basis where they’re not focused on the outcome,” he continues. “They’re more focused on the inputs to business. When you’re looking at a company like iGATE, you know we have some heavy, heavy commercial experience.
“So, we are actually looking to go to the government with a contracting model that says, ‘Look, don’t pay us for mistakes, only pay us for the product you’re looking for. If we make mistakes, we’ll accept the risk of that. You pay us for the outcome you’re looking for and we’ll deliver it.’”
Coffin has not released specific sales figures for the government services division. But, he says defense-related work accounts for roughly 40 percent of federal revenues, with the rest coming from civilian agencies. Although the specific contracts and programs will change over time, Coffin expects to see that same revenue mix to remain in place. Sales to state and local government constitute 10 percent to 15 percent of sales to the public sector.
Meanwhile, iGATE provides services to government organizations through several large commercial firms. For example, General Electric ranks as one of the company’s largest clients.
As such, iGATE has extensive experience supporting health care information technology services around the world, and Coffin intends to use this as a major sales hook. Under President Obama’s health care legislation, hospitals, outpatient clinics and doctors offices throughout the United States will face new federal pressure to invest in health information technology platforms to match additional federal technology programs designed to lower health care costs.
iGATE already supports several major U.S. government health care information technology initiatives. In particular, iGATE is a supplier to the Defense Department’s sprawling TRICARE program for military health services, and the company also counts the Department of Health and Human Services as a key client.
For his part, Coffin is something of a renaissance figure. For example, he is a former business consultant and an expert in the efficiency field known as Lean Six Sigma, where he says he ranks as a “master black belt.”
He also loves to cook Cajun food, and he recently whipped up a crawfish boil for roughly 150 guests. Coffin met his wife, a native of Louisiana, on Bourbon Street in New Orleans while he was visiting the city during his pilot training days. She is an executive with United Technologies, and the couple has four children, ages 12, 15, 16 and 17.
Coffin originally hails from the Boston area, where he grew up playing hockey. He likes to draw and also play drums, adding that his daughter is pestering him to help her start a rock band. Family consumes most of his spare time as he also coaches youth sports in which his children are involved.
He also is an expert on project management and defense acquisitions, having received professional accreditations in both fields. Before joining iGATE in early 2012, he logged stints at Adelphia Business Solutions, the Institute for Defense Analyses and Celtiq LLC, where he served as president and chief executive officer.
From this vantage point, Coffin says iGATE has another strong sales message with federal contracting officers. As an information technology services firm, iGATE can focus with laser-like intensity on the result because it is not tied to any one technology platform.
“We are both hardware and software agnostic,” he declares. “We’re focused on the application development and the business process—how to make the business process lean. You see some of the larger systems integrators selling off some of their services so they don’t affect their hardware purchases.
“That plays to one of our strengths. Companies like ours can fill in that void when you see the larger guys in this market having to walk away from some of those opportunities in the future.”