|
Affiliated Computer Services, Inc. - Data Processing -
Category Directory
214-841-6111
2828
North Haskell
Dallas, TX 75204
www.acs-inc.com
Sales
$3.8
billion
Business Description
We
are a global, Fortune 500 company delivering comprehensive business process
outsourcing and information technology outsourcing solutions to commercial
and government clients. We were incorporated in Delaware on June 8, 1988 and
are based in Dallas, Texas. We support client operations in nearly 100
countries. Our clients have time-critical, transaction-intensive business
and information processing needs, and we typically service these needs
through long-term contracts. Approximately 91%, 90% and 89% of our revenues
for fiscal years 2003, 2002 and 2001, respectively, were recurring.
Recurring revenues are revenues derived from services that our clients use
each year in connection with their ongoing businesses.
Our services enable businesses and government agencies to focus on core
operations, respond to rapidly changing technologies and reduce expenses
associated with business processes and information processing. Our business
strategy is to expand our client base and enhance our service offerings
through both internal marketing and the acquisition of complementary
companies. Our marketing efforts focus on developing long-term relationships
with clients that choose to outsource mission critical business processes
and information technology requirements. Our business expansion has been
accomplished both from internal growth as well as through acquisitions.
Since inception, our acquisition program has resulted in geographic
expansion, growth and diversification of our client base, expansion of
services and products offered, and increased economies of scale.
We serve three primary markets, which include state and local governments,
commercial clients, and the federal government. We are a leading provider of
business process outsourcing and information technology services to state
and local governments. During fiscal year 2003, revenues from our state and
local government segment accounted for approximately $1.7 billion, or 45% of
our revenues. We provide technology-based services with a focus on
transaction processing and program management services such as child support
payment processing, electronic toll collection, welfare and community
services, and traffic violations processing. We also design, develop,
implement, and operate large-scale health and human services programs and
the information technology solutions that support those programs.
Our commercial sector accounted for approximately $1.2 billion, or 33% of
our fiscal year 2003 revenues. We provide business process outsourcing,
technology outsourcing, and systems integration services to our commercial
sector clients. These services are provided to a variety of clients
nationwide, including healthcare providers, retailers, wholesale
distributors, manufacturers, utilities, financial institutions, insurance
and transportation companies. Our business process outsourcing services
include claims processing, finance and accounting, loan processing, human
resource and document processing. Our technology outsourcing services
include mainframe, midrange, desktop, network, and web-hosting solutions.
Our commercial systems integration services include application development
and implementation, applications outsourcing, technical support and
training, as well as network design and installation services.
We also serve the federal government market, which during fiscal year 2003
accounted for approximately $0.9 billion, or 22% of our annual revenues. Our
services in this market are comprised of business process outsourcing
services, which consist primarily of loan processing services and human
resources services, as well as, systems integration services, which include
application development and outsourcing, network implementation and
maintenance, desktop services, technical staff augmentation, and training
under long-term contracts. Approximately 44% of revenues within our federal
government business are derived from civilian agencies with the remaining
56% from Department of Defense agencies.
In August 2003, we announced an agreement to sell the majority of our
federal government business to Lockheed Martin Corporation for approximately
$658 million, which includes $70 million payable pursuant to a five-year
non-compete agreement. Revenues from the federal business to be divested
were approximately $685 million for fiscal 2003. We will retain our business
process outsourcing contract with the Department of Education, with current
annual revenues of $172 million. Additionally, our commercial and state and
local government operations will continue to serve as a subcontractor on
portions of the transferred business. In addition, we will acquire Lockheed
Martin Corporation’s commercial information technology business, with
trailing, recurring annual revenues of approximately $240 million, for
approximately $107 million. These transactions, which are subject to certain
closing conditions, are expected to be completed during the second quarter
of fiscal 2004. The expected after-tax proceeds from the divestiture will
generally be used to pay down debt, to fund our share repurchase program
(See Item 5) and for general corporate purposes.
Market Overview
The demand for our services has grown substantially in recent years, and we
believe that this will continue to increase in the future as a result of
strategic, financial and technological factors. These factors include:
• the desire of organizations to focus on their core competencies;
• the increasing desire by organizations to drive process improvements and
improve the speed of and reduce the cost of execution;
• the desire by organizations to have a workforce that is able to expand and
contract in relation to their business volumes;
• the increasing acceptance by organizations to utilize offshore resources
for business process outsourcing;
• the increasing complexity of information technology systems and the need
to connect electronically with clients, suppliers, and other external and
internal systems;
• the increasing requirements for rapid processing of information and the
instantaneous communication of large amounts of data to multiple locations;
and
• the desire by organizations to take advantage of the latest advances in
technology without the cost and resource commitment required to maintain
in-house systems.
Business Strategy
The key components of our business strategy include the following:
• Expand Client Base - We seek to develop long-term relationships with new
clients by leveraging our subject matter expertise, world-wide data
manufacturing capabilities and infrastructure of information technology
products and services. Our primary focus is to increase our revenues by
obtaining new clients with recurring requirements for business process and
information technology services.
• Expand Existing Client Relationships - We seek to expand existing client
relationships by increasing the scope and breadth of services we provide.
• Build Recurring Revenues - We seek to enter into long-term relationships
with clients to provide services that meet their ongoing business
requirements while supporting their mission critical business process or
information technology needs.
• Provide Flexible Solutions - We offer custom-tailored business process and
information technology solutions using a variety of proprietary and
third-party licensed software on multiple hardware and systems software
platforms and domestic and international workforces that are able to expand
and contract in relation to clients’ business volumes.
• Invest in Technology - We respond to technological advances and the rapid
changes in the requirements of our clients by committing substantial amounts
of our resources to the operation of multiple hardware platforms, the
customization of products and services that incorporate new technology on a
timely basis and the continuous training of our personnel.
• Maximize Economies of Scale - Our strategy is to develop and maintain a
significant client and account/transaction base to create sufficient
economies of scale that enable us to achieve competitive costs.
• Complete Strategic and Tactical Acquisitions - Our acquisition strategy is
to acquire companies to expand the products and services we offer to
existing clients, to obtain a presence in new, complementary markets and to
expand our geographic presence.
• Attract, Train and Retain Employees - We believe that attracting,
training, and retaining high quality employees is essential to our growth.
We seek to hire motivated individuals with strong character and leadership
traits and provide them with ongoing technological and leadership skills
training. We emphasize retaining our employees with challenging work
assignments and incentive programs.
State
and Local Governments
We are a leading provider of business process outsourcing services to state
and local governments. Our services help state and local agencies reduce
operating costs, increase revenue streams and increase the quality of
services to citizens. Approximately 45% of our fiscal 2003 consolidated
revenues were derived from contracts with state and local governments. State
and local government clients may terminate most of these contracts at any
time, without cause, for convenience or lack of funding. Additionally,
government contracts are generally subject to audits and investigations by
government agencies. If the government finds that we improperly charged any
costs to a contract, the costs are not reimbursable or, if already
reimbursed, the cost must be refunded to the government.
Pricing for our services in the state and local market is generally
determined based on the number of transactions processed, human services
cases managed or, in instances where a systems development project is
required in our state healthcare unit, we generally price our services on a
fixed fee basis for the development work.
State Healthcare
We design, develop, implement, and operate large-scale health and human
services programs and the information technology solutions that support
those programs. Today, we operate fourteen state Medicaid programs and six
state Child Health Insurance Programs that cover approximately 19.4 million
recipients, process over 397 million Medicaid healthcare claims annually and
disburse over $40 billion in provider payments. We also operate 25 state
pharmacy benefits management programs that assist states in controlling
prescription drug costs, pharmacy intervention and surveillance and the
processing of drug claims. We operate fourteen state decision support
systems that assist states with data collection, fraud and abuse detection
and case management. We also assist states in bringing their health programs
into compliance with the Health Insurance Portability and Accountability Act
(HIPAA).
In 2001, we were awarded a contract by the Department of Community Health of
the State of Georgia (“DCH”) to develop, implement and operate a system to
administer health benefits to Georgia Medicaid recipients as well as state
government employees. This system development project is large and complex
and involves development of the first system in the industry that will
process both Medicaid and state employee claims. The Medicaid phase of this
project was implemented on April 1, 2003. As with any large, complex system
development and implementation project certain delays and operational issues
were encountered in this phase. The initial phase operational issues have
been substantially addressed. We are working in collaboration with DCH and
the Georgia healthcare providers to address ongoing program issues,
including the implementation of new policy changes by DCH as well as changes
required by HIPAA. We believe, based on our analysis to date, that the
savings to the State of Georgia associated with this initial phase of the
contract will exceed the savings initially anticipated. We are also in
continuing discussions with DCH regarding claims that we and DCH have
asserted against each other related to delays in the initial phase
development. Both we and DCH have agreed to resolve the issues in a
collaborative manner. Any final amount that we would agree to pay DCH has
not been negotiated; however, the cost associated with delays in system
implementation, including incremental transition costs incurred by DCH, have
been properly and fully reflected in our financial results. We expect to
resolve this matter over the next several months in an amicable fashion;
however, there can be no assurance as to the ultimate outcome of this
matter.
Children and Family Services
We are a major provider of child support and payment processing with high
volume remittance processing and service center operations that handle 54%
of the nation’s payment transactions. We also provide “locate and
collection” services to find delinquent parents and collect past due child
support and other payments. Within the Children and Family Services area we
provide electronic benefits transfer, which is the issuance of food stamps
and cash benefits through magnetic stripe cards with redemption through
point of sale devices (POS) and automated teller machines (ATM).
Transportation Systems and Services
We focus on three areas within our Transportation Systems and Services:
Electronic Toll Collection, Motor Vehicle Services and Commercial Vehicle
Operations. Within Electronic Toll Collection we offer toll agencies a
complete array of services including the operation of the back-office
customer service center as well as lane installation and integration. We
currently operate the E-ZPass programs in New Jersey and New York, the
largest electronic toll collection program in the world. Within Motor
Vehicle Services, we assist states in the processing of fuel tax and
registration revenues. We process more than 25% of state-issued operating
credentials and support the operations of more than 31% of the motor
carriers operating in the United States. Within Commercial Vehicle
Operations we offer a nationwide network that electronically checks safety
credentials and weighs trucks at highway speed, granting participating
truckers authorization to bypass open weigh stations and ports-of-entry
without stopping.
Municipal Services
We serve large cities and counties in the United States by focusing on
revenue-generating transactions that involve interfacing with citizens.
These services are focused in two areas: parking management and violations
processing; and photo enforcement. For our violations processing clients, we
provide complete management, technical and operational support throughout
the entire timeline of a violation, from issuance to final disposition. In
photo enforcement, we use cameras to photograph traffic violations and
identify the registered owner of the vehicle so that the municipality can
determine whether the citation can be mailed.
Our Government Records Management group has been a leading provider of
computerized document indexing and recording solutions for Recorders of
Deeds, by providing computerized record management systems. The client base
of this business group includes nearly 500 system customers and hundreds of
customers that outsource their indexing and document imaging needs to us.
Welfare and Community Solutions
We provide management, operations and systems service offerings to local
Workforce Development Boards and Coalitions, thereby creating a
government-mandated, integrated One-Stop system linking job seekers and job
providers in accordance with government mandated requirements. Through the
operation of approximately 105 One-Stop centers across the country, we use
technology innovations and re-engineered service delivery models to provide
job-related service to assist low-income families in securing and retaining
employment and help employers find and retain potential employees.
Information Technology Outsourcing
We are a leading provider of full-service IT outsourcing services to cities
and counties throughout the United States. We also provide justice
information systems for state and municipal courts, finance and tax systems
for local governments, and application outsourcing services, and
e-government solutions for state and local customers.
Commercial
Within the commercial sector, which comprises 33% of our fiscal year 2003
consolidated revenues, we provide our clients with business process
outsourcing, technology outsourcing and systems integration services.
Pricing for our services in the commercial market varies by type of service.
For business process outsourcing services, we typically price these services
on the basis of the number of accounts or transactions processed. Our
technology outsourcing services, which are normally provided pursuant to
multi-year contracts, are normally priced on a resource utilization basis.
Resources utilized include processing time, the number of desktops managed,
professional services, data storage and retrieval utilization, and output
media utilized. Our systems integration services are generally offered on a
time and materials basis to existing long-term clients under short-term
contractual arrangements.
Business Process Outsourcing
Our commercial business process outsourcing practice is focused in five
major categories: claims processing, human resources, finance and
accounting, loan processing, and document processing. We provide healthcare
and other claims processing for many of the large healthcare payers in the
United States. Within human resources, we provide benefit claims processing,
employee services call centers, benefits administration, employee
relocation, training administration and learning services, vendor
administration, and employee assistance programs. Within finance and
accounting we provide revenue/invoicing accounting, disbursement processing,
expense reporting, procurement, payroll, cash management, fixed asset
accounting, tax processing, general ledger and other services associated
with finance and accounting that are process and technology sensitive. We
handle loan processing services such as collections, account reconciliations
and borrower correspondence for third-party student loan programs and
specialty lending programs. We also handle the processing and storage of
documents for banks, mortgage companies and other corporations that desire
electronic access and storage of their documents.
We receive client information in all media formats such as over the web,
EDI, fax, voice, paper, microfilm, computer tape, optical disk, or CD ROM.
Information is typically digitized upon receipt and sent through our
proprietary workflow software, which is tailored to our clients’ process
requirements. Utilizing network technology, we have developed expertise in
transmitting data around the world to our international workforce. We have
approximately 10,000 employees in Mexico, Guatemala, Ghana, Dominican
Republic, Spain, India, Malaysia, Ireland, Germany and China, as well as
several other countries, that support our commercial business process
outsourcing services. A majority of our business process outsourcing
workforce is compensated using performance-based metrics, and as a result,
varies with our clients’ transaction volumes.
Technology Outsourcing
We offer a complete range of technology outsourcing solutions to commercial
businesses desiring to improve the performance of their information
technology organizations. Our target market for technology outsourcing
services consists of medium-to-large-sized commercial organizations with
time-critical, transaction-intensive information processing needs. Our
technology outsourcing solutions include the delivery of information
processing services on a remote basis from host data centers that provide
processing capacity, network management and desktop support. Information
processing services include mainframe, mid-range, desktop, network, and
web-hosting solutions.
We provide our technology outsourcing solutions through an extensive data
center network, which is comprised of three host data centers and eight
remote data centers. Our data centers and clients are connected via an
extensive telecommunications network. We monitor and maintain local and wide
area networks on a seven-day, 24–hour basis and provide shared hub satellite
transmission service as an alternative to multi-drop and point-to-point hard
line telecommunications networks.
Systems Integration Services
Our systems integration services include application development and
implementation, applications outsourcing, technical support and training, as
well as network design and installation services. Our systems integration
services include the development of web-based applications and
web-enablement of information technology assets, allowing our clients to
conduct business with their customers and business partners via the
Internet. We also provide systems integration services to clients who are
deploying client/server architectures, advanced networks and outsourcing
legacy applications maintenance.
Federal Government
Within the federal government sector, we provide business process
outsourcing and systems integration services. Approximately 22% of our
fiscal year 2003 consolidated revenues are derived from contracts and
subcontracts with federal government agencies. Our federal government
contract costs and fees are subject to audit by the Defense Contract Audit
Agency (“DCAA”). These audits may result in adjustments to contract costs
and fees reimbursed by our federal customers. To date, we have experienced
no material adjustments as a result of audits by the DCAA. The DCAA has
completed audits of the Company’s defense contracts through fiscal year 2001
and all other federal contracts through fiscal year 2000.
Pricing for services provided to our federal government clients varies by
type of service. Business process outsourcing services provided to federal
government clients are generally priced on the basis of the number of
accounts or transactions processed. For applications development,
applications outsourcing, network implementation and maintenance, desktop
services, technical staff support, and training, we generally price these
services on a cost plus fixed fee and time and materials basis.
Business Process Outsourcing
Our federal business process outsourcing services consist primarily of loan
servicing and human resource services for federal agencies. Our loan
services generally include billing, lock-box payment processing, related
accounting and reconciliation, and client service call center and web-site
operations. In addition to the Department of Education contract discussed
below, we have contracts with the Defense Finance & Accounting Services,
Housing and Urban Development, Ginnie Mae and Pension Benefit Guarantee
Corporation.
Our largest contract is with the Department of Education (the “Department”),
for which we service student loans under the Department of Education’s
Direct Student Loan program administered by its Office of Federal Student
Aid (“FSA”). Revenues from this contract represent approximately 4% of our
consolidated revenues. This contract was scheduled to run through September
30, 2003. In November 2001, the Department extended the contract term
through September 30, 2006, with an option for further extension through
September 30, 2007. In December 2001, SLM Corporation (“Sallie Mae”)
challenged the Department’s sole-source extension in a protest filed with
the Department. The FSA initially took the position that the Sallie Mae
protest was without merit and that the contract extension was lawful. In
July 2002, the Department’s deciding official sustained the protest,
concluding that further market research was needed to support the
sole-source extension of our contract. However, the deciding official
declined to rescind our contract extension and directed the FSA to analyze
its direct loan servicing needs and procure the services in compliance with
law.
On January 31, 2003 FSA officials notified us that they would conduct a
competitive procurement for Common Services for Borrowers which will be an
integrated solution for FSA for servicing, consolidation and collections
functions for federally insured student aid obligations and will absorb all
loan servicing requirements for the Department. The Department announced
that the competitive procurement would be conducted in two phases with phase
one being the determination of eligibility to participate and phase two
being the selection process. We, along with Sallie Mae and a third
participant who subsequently withdrew from the competition were selected as
eligible to participate. On July 7, 2003, we submitted our
proposal to the Department. In August 2003, the Department notified us that
it had determined that we are in the competitive range for award, and that
negotiations would begin shortly to be followed by the Department’s request
for submission of final proposal revisions and an award determination. We
anticipate that the Department will make a decision on the procurement in
October 2003 and believe we are positioned favorably because of our
performance record with the Department. However, there can be no assurance
that we will be awarded the new contract for Common Services to Borrowers.
In May 2003, the Department provided public notice that it intended to enter
into negotiations with us to modify our existing contract for the purpose of
revising the period of performance for a period of up to 36 months, with the
use of appropriate options, through September 30, 2006. The Department
further stated that this contract action would be on a sole source basis and
would accommodate a prompt and successful transition to the Common Services
for Borrowers vendor. We are continuing discussions with the Department
regarding this modification; however, the terms of the proposed modification
have not been negotiated at this time and it is likely that the negotiations
will not be completed by September 30, 2003, the date the Department stated
it anticipated completing the contract modification.
Systems Integration Services
We provide applications development, applications outsourcing, network
implementation and maintenance, desktop services, technical staff support,
and training under long-term contracts to the Department of Defense and
civilian agencies, who generally either contract directly with us or through
the General Services Administration for these services. The General Services
Administration performs the procurement function for many civilian and
Department of Defense agencies. Approximately 33% of these services for
fiscal year 2003 were provided pursuant to six contracts with the General
Services Administration. We also provide our services directly to a variety
of civilian agencies such as the Departments of Labor, Treasury,
Transportation and Energy, as well as NASA, FAA, the U.S. Postal Service,
and the Federal Energy Regulatory Commission. In addition to the above
services, we provide command and control, communications, computer and
intelligence, surveillance, and reconnaissance (C4 and ISR) systems
integration services to a variety of Department of Defense agencies such as
Air Force Materiel Command, the U.S. Unified Commands, and the National
Security Agency.
Data Processing Companies in the Directory
Affiliated Computer Services
Bank of New York
BISYS
Ceridian
DST Systems
EquiServe
Fiserv
NCR
Metavante
SunGard Data Systems
WebMD
|
|
