• Can Anyone Compete with Booz?

    July 30, 2013  |  by Katie Benner

    Thanks to l'affair du Edward Snowden and a big story in BloombergBusinessweek, the public now knows about Booz Allen and the company's dominance in high-end military services. This industry, which BW calls the spy business, includes data analytics, cyber security, geospatial data, and intelligence gathering.

    Outside of Booz, only a few companies can offer high-end services in a nimble fashion and meet the large scale of many government contracts. The industry is pretty much bifurcated between mega defense firms (think Lockheed Martin) and small specialized companies.

    But it seems that private equity firms that specialize in the defense sector (a small but strategic and well positioned subset) are fostering companies that could someday fill in the gap between the large and small players in the space, perhaps with an eye toward competing directly with the likes of Booz.

    One example is a company called Vistronix, which I wrote about in February as part of a larger story on investing in cyber security. While a key acquisition doubled revenue, the company remained small at sub-$100 million in sales.

    Now it seems that Vistronix intends to grow and become a force in the high end government services space. Deepak Hathiramani, Vistronix Chairman & CEO, tells Fortune: "We are building a team of experienced and proven leaders committed to our mission of building a mid-tier national security firm,"

    To that end, Vistronix has made some interesting personnel moves, hiring two former executives from Veridian, a network security, surveillance, and weapons detection firm, including John Hassoun as President and Ron Jones as Chief Strategy Officer. (Yes, these cyber company names sound vaguely sci-fi and sort of alike.)

    To understand what Hassoun and Jones could mean for Vistronix, take a look at what they accomplished at Veridian, which was bought by General Dynamics in 2003. At that time, Veridian had revenues of $1.2 billion and 7,300 employees in 38 states. More than 75% of those employees held national security clearances. (By comparison, Booz Allen currently has revenues of about $5.8 billion.) At Veridian, Hassoun and Jones created track records of building - organically and through acquisition - a high-end federal services businesses, creating the sort of mid-size company that is in short supply in the defense services space.

    DC-based Enlightenment Capital, a defense and government focused investment firm with its own deep deep set of industry ties, is also backing Vistronix. Enlightenment supported the January acquisition of Technology Associates, which made highly specialized geospatial and data visualization software. If you're watching the national security space, keep an eye on Vistronix. More acquisitions are likely to come.