SAIC and the Proposed Solution to Its Problems

¶ … SAIC's problem is that it is vulnerable to downturns in U.S. defense spending, as 90% of its revenue comes from defense contracts. No company is without risk when it only has one major customer -- the solution is to diversify the revenue streams. Taking a look at the list of competitors -- IBM, HP, Accenture are among them. These are large, diversified organizations that are not dependent on DoD business in the same way that SAIC is.

There is no reason that SAIC cannot diversify its business away from DoD dependency. In order to execute this, the company will need to look at areas where it can take its existing capabilities and market them to the private sector. This will likely require a shift in the organizational mindset and culture, because there are some rather significant differences between competing for private sector business and competing for DoD business.

A lesser solution, but still an option, is to structure the business around the idea that SAIC will see reduced revenue in the coming years. Essentially, this means scaling back the costs of the business somewhat, so that the company will still be profitable in the event of a decline in business. SAIC would seek to become a more efficient company by doing this, retaining much of its capabilities but at the same time trimming the fat from its operating costs.

By doing this, the company will still be dependent on the Department of Defense, but it will also be in a position where that dependency is not necessarily a threat to its profitability. This is clearly a second-best option, but it is possible. The best solution is the first one.

It is a somewhat riskier solution, because it involve increasing the level of entrepreneurial activity within the organization, but it is also something that is in line with many of the competitors, who all have various degrees of entrepreneurial mindset in their companies. It is also the solution that direct addresses the core problem that was identified. The second proposed solution does not address the problem, only seeks to mitigate the effects of that problem.

Thus, the more aggressive solution that directly addresses the problem is the one that should be tackled. Risk Assessment The proposed strategy of entering new businesses is an entrepreneurial one. SAIC will need to be creative in identifying new uses for the products and services that it currently has, and with the development of new ones. There is inherent risk in entrepreneurial activity, but as Kent (2001) notes, entrepreneurs seek to reduce risk in order to give their ideas a greater chance at success.

This same thinking will apply to SAIC as well -- it needs to do something, but it has to find pathways to revenue that do not dramatically increase the risk associated with its business expansion. Dunn (2003) argues that one of the ways to manage risk better is to improve organizational emotional intelligence. For SAIC, this implies that will need to understand what the emotional intelligence level of the organization.