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[] USA Today 30.10.01: Techies Answer USA's Call To Arms,
USA Today
October 30, 2001

Techies Answer USA's Call To Arms

By Edward Iwata, USA Today

SAN FRANCISCO ? A new breed of defense contractor ? high-tech and biotech ? is scrambling to take part in what could be the largest U.S. military buildup in decades.

Previous wars and battles called for heavy-duty weapons and aircraft made by military and aerospace conglomerates, such as Boeing, Lockheed Martin and General Dynamics.

But defense against terrorists in the 21st century demands super-fast computers, security software and antibiotics better known in tech labs than in Pentagon war rooms.

"It's a call to arms for our industry," says CEO Allan Griebenow of Axcess, a network-security firm based in Dallas.

It won't be easy, though, for newcomers to waltz into the world of defense procurement. They'll compete against an old boys' network of 10 to 15 large defense contractors and their favored subcontractors. They'll be baffled by the government's complex legal, accounting and bidding rules. "A lot of technology companies have never done business with the government," says analyst Bill Keevan of Andersen. "I guarantee there will be problems."

That isn't expected to stop anyone. After the attacks, Congress approved $40 billion in emergency funds to combat terrorism and aid recovery efforts. Billions more are anticipated to defend airports, highways and power plants. Defense-related tech research and contracts ? about one-third of last year's $300 billion military budget ? are sure to grow. Analyst Paul Nisbet at JSA Research thinks it could rival the defense spending of the Reagan years or the Cold War buildup. Hundreds of tech-related firms are positioning to vie for a piece of the spending.

Salient Stills, a digital-imaging firm in Boston, is one such firm. Its software is used by media firms to convert video from cable, satellites and cameras into high-quality images. Founder Laura Teodosio launched the firm 5 years ago after designing the software as a student at MIT's Media Lab.

Shocked by Sept. 11, Salient Stills donated its software to the FBI, which is testing it. The software searches thousands of videos from security cameras at airports, hotels and banks and sharpens fuzzy images.

But it's a big leap to turn promising technology into a federal contract. Salient Stills executives are cautiously scouting the new terrain. They're meeting with government officials. They've hired a consultant well known in Washington. They're aiming for partnerships with federal contractors. And they may beef up corporate and advisory boards with military and intelligence experts.

"We're exploring the new market," CEO Steve Hill says. "You can't just call the head of the Federal Aviation Administration and say, 'Hey, I've got some great software. You want to buy it?' "

Big players have edge

Tech-related companies with defense-contract experience ? Compaq Computer, EDS and KPMG Consulting, for instance ? will have a big edge. They've partnered with major federal contractors for years.

On Monday, SGI Federal, a subsidiary of high-end computer maker Silicon Graphics, announced a research deal with the Air Force Space Warfare Center to test and evaluate technologies.

Other tech firms, such as software maker Cylink, already have strong federal ties. Cylink CEO William Crowell is former deputy director of the National Security Agency. Cylink sells encryption technology to the FBI, the Justice Department and the Customs Service. About 20% of Cylink's $70 million in revenue last year came from defense contracts.

Oracle has sold billions of dollars of database software since 1985 to the military, the FBI and other federal agencies. After Sept. 11, a brigade of Oracle executives, including former military officials, staged late-night meetings to mobilize Oracle's 1,000 employees who work on federal contracts and to strategize how their software might help battle terrorism. Also, CEO Larry Ellison met with Attorney General John Ashcroft to drum up support for a voluntary national ID card that would be mandatory for immigrants. "Information technology is the enemy of terrorists," says Oracle executive Kevin Fitzgerald.

Axcess recently launched a marketing group to focus on defense contracts. It also promoted Air Force veteran Jim Ferguson as director of the firm's "homeland security initiative." Earlier this year, the Department of Defense started testing Axcess' small radio-wave devices that track and identify weapons and missiles. Several airports, including John F. Kennedy International, use the devices to identify fuel trucks and their drivers. "We're ready at a moment's notice to gear up," CEO Griebenow says.

Meanwhile, drugmaker Barr Laboratories is lobbying the nation's top health czar in hope of producing a generic version of Cipro, an antibiotic used against anthrax. German drugmaker Bayer holds the patent on Cipro. In a letter to Health and Human Services Secretary Tommy Thompson, Barr CEO Bruce Downey wrote: "Barr stands ready, willing and able to manufacture Cipro."

High-tech leaders also are backing legislation that could cut red tape in the defense-contracting process. The snail-like pace of military procurement can take months or years. Says CEO Bob McCashin of biometrics firm Identix, which sells fingerprint-scanning devices: "If our industry has the right technology to save lives, we need to utilize it ? and quickly."

Poised for action

Technology, of course, isn't new to federal agencies. The National Security Agency uses sophisticated communications and surveillance gear. The Department of Defense devised the Internet three decades ago for government use. Defense contractors have toiled for years on complex technology.

But, as Gartner analyst French Caldwell puts it, "Our national missile defense won't help much against truck bombs." Firms that may gain in the digital war against terrorists:

? Abgenix vs. bioterrorism. Two years ago, the government launched a bioterrorism offensive to stockpile vaccines and antibiotics that fight scourges such as smallpox. But Sept. 11 and anthrax incidents have thrust biopharmaceutical firms even more into the realm of national security.

In a lab in Fremont, Calif., gene-therapy company Abgenix is waging a quiet battle against terrorists. Since 1999, Abgenix has supplied Army researchers with genetically engineered mice that produce antibodies to fight anthrax and the deadly Ebola and Marburg viruses. Since Sept. 11, Abgenix has offered to help the Army research and produce antibodies. Geoff Davis, chief technology officer at the privately held company, declined to disclose how soon Abgenix and the Army might roll out antidotes.

? EnviroFoam Technologies. This tiny company in Huntsville, Ala., is licensed to sell a powerful decontaminant made by Sandia National Laboratories. Used as a foam, spray or liquid, the chemical neutralizes many biological and biochemical agents, including nerve and mustard gases. Before Sept. 11, the decontaminant was a hard sell. Now, the Army, the Environmental Protection Agency and the National Guard are testing it, says EnviroFoam CEO Peter Beucher. "It's not a miracle spray wash, but it'll kill anthrax very effectively."

? High-tech heavyweights. "Even before Sept. 11, we knew the military had to change to combat terrorism," says Compaq executive Ron Ross. "Now there's a sense of urgency." Compaq, the world's No. 2 personal-computer maker, has won big contracts recently to sell computers, laptops and handheld devices to the Army, Navy, National Security Agency and Northrop Grumman.

Ross says the firm will post $1.4 billion in revenue this year from military and other government contracts. That will be 4% or 5% of Compaq's $30 billion or more in 2001 sales. He declined to predict Compaq's future revenue growth in defense contracts.

KPMG hopes to scale a huge barrier: getting thousands of military and law-enforcement databases worldwide to "talk" to each other and share intelligence. KPMG worked with former Pennsylvania governor Tom Ridge, now head of the new U.S. Office of Homeland Security, to blend the computer networks of dozens of police agencies, courts and prison systems in the state. While the logistics would be nightmarish, the same could be done nationwide.

"It's a massive effort," says Dan Johnson of KPMG's Public Services Business, "but we've had real good luck in catching a lot of bad guys using this system."

Much of the war against terrorism will be fought in the cyber trenches. Enter HNC Software. The San Diego-based firm makes software that hunts for money-laundering trails and fraud in financial transactions.

Since Sept. 11, HNC has teamed with PROS Revenue Management, an airline consultant. HNC's software looks for suspicious travel patterns and buying habits of passengers. The CIA already uses HNC's software to analyze terrorists' activities in the Middle East, CEO John Mutch says. Over the next 3 to 5 years, Mutch predicts military contracting could make up 10% or more of HNC's revenue. "The federal government is looking to the tech community for solutions," Mutch says. "We believe we can do some good work." 

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