Strategic analysis of Network Designs, Inc.'s software applications division

Strategic Analysis of Network Designs, Inc.

Despite enormous progress in recent years to help level the playing field for women and minorities in the United States, some interesting patterns remain firmly in place in terms of how some occupations continue to be gender related, with some fields being feminized and others mostly males. The introduction of computers and the Internet, as well as the need for the right hardware and support services to make these systems work has changed this gender-related playing field in a number of substantive ways, though, and many women- and minority-owned enterprises are emerging as healthy competitors in this fiercely competitive industry. According to Fisher and Williams, "At the beginning of the last decade, the Internet as we know it did not exist. Today, industry uses the Internet to conduct electronic commerce routinely, making business-to-business transactions. While government has lagged behind, several federal agencies have implemented electronic initiatives" (p. 17). One such federal agency is the Office of Rulemaking (ARM), which uses a customized database developed by Network Designs, Inc. An analysis of this company's software applications development division is provided below, followed by a summary of the research and salient findings in the conclusion.

Review and Analysis

Background and Overview of Network Designs, Inc.

Today, Network Designs, Inc. (hereinafter "Network Designs" or alternatively, "the company") describes itself as "a small, women-owned business" and "an information technology (it) solutions provider that integrates new technologies into proven, enterprise-wide solutions. Network Designs provides networked video surveillance, data and physical security, and computer forensics and training in support of Force Protection Initiatives and homeland security" (Fact sheet, 2007 p. 1). The company maintains offices in the Washington DC Metro Area and in Asia and holds General Service Administration (GSA) Schedule GS-35F-4707H, COMMITS, and FAA Blanket Purchase Agreement contract vehicles. The company's primary divisions are described in Table 1 below.

Table 1.

Major Divisions of Network Designs, Inc.

Division

Description

Network Design & Integration

This division is responsible for network architecture, implementation, integration, and management. This division provides clients with solutions for the following operations and corporate functions: call centers, customer profiles; federal supply service automatic call distribution center; desktop-managed upgrades; and, computer installation and support (LAN, WAN, MAN, and wireless applications).

Software Applications Development

This division employs the Capability Maturity Model for Software on applications development projects across the federal marketplace. This division's first priority is to understand the business goals of its customers in order to provide individualized service and products.

Strategy of the Division

As noted above, one of the most important strategies currently in place in the company's Software Applications Development division is to customize its software design/integration through the use of the Capability Maturity Model. Thorn (2003) reports that the Capability Maturity Model (CMM) is one of most commonly accepted standards and measures of effective project management. Originally developed by the Carnegie-Mellon University (CMU) Software Engineering Institute (SEI) based on sponsorship by the Department of Defense (2002), the CMM provides timely descriptions of the primary elements of an effective software development and project management process that can be used to provide the basis for continuous process improvement.

Since its introduction, the Capability Maturity Model has become the standard that is used to appraise the quality of the development process in a wide range of industries (Meyer, 2002). In this regard, Thorn describes CMM as an iterative function that defines a consistent path for improvement that can be used for organizational development from their origin as a set of ad hoc, immature procedures to a consistent, mature, disciplined process; in addition, the CMM defines five specific levels of progressive process maturity: (a) Initial, (b) Repeatable, - Defined, (d) Managed, and (e) Optimizing (Thorn, 2003). Further, each of these five areas also have a recommended Process Areas (PA) that is addressed at each level with level 2 (Repeatable) functions that specifically focus on various project management issues with an emphasis on the ability to establish and follow consistent processes (Thorn, 2003). This author adds that, "The hypothesis underlying CMM is that effective practices must be built on one another in logical progression rather than adopted scattershot. Software developers participate voluntarily in the CMM assessment program in order to gauge their rate of improvement" (Meyer, 2002, p. 149).

Contractors seeking lucrative federal contracts in the future will also likely voluntary participate in the CMM approach if they want to improve their competitive edge, and this is exactly what the leaders at Network Design have done with their Software Applications Development division and these issues are discussed further below.

Division's Fit within the Company's Strategic Framework.

Value added by division to the company and vice versa. By providing the federal government with exactly what they want in terms of contractor selection criteria, the corporate leaders at Network Design are able to satisfy existing government requirements in a classic C (3)E strategic approach. Furthermore, in a reciprocal fashion, collaboration with the company's Software Applications Development experts has allowed the government contracting offices to fine-tune their bid specifications to encourage companies such as Network Design to compete for contracts by keeping their resources and services in line with these specifications. This is not to say that collusion is taking place in this process, of course, but it is to say that it is much easier for companies such as Network Design with substantive bidding experience and the credentials to match to secure government contracts than it is for an up-and-comer with little or no relevant experience in either area. The use of the Capability Maturity Model is clearly congruent with federal government policies for software development and design, a point that has not been lost on the corporate leaders at Network Design.

Potential misalignments. Unexpected innovations have been known to introduce misalignments between existing business practices and processes, with typewriters, adding machines and buggy whips representing just some of the fading remnants of the past. It is possible that the company's concentration of keeping their resources and expertise so finely tuned to the federal government's existing needs that they may overlook innovations that are taking place elsewhere in the industry. Likewise, the lack of ISO 9000 standards in the Network Design marketing and management mix may create a disadvantage for them in the future when competing for contracts with companies that do.

Identification and Evaluation of Competitor's Strategy.

One of Network Design's major competitors today is GAITS, a computer consulting/programming/networking company maintaining a Web site at http://www.gaits.com.Like Network Design, GAITS specializes in the provisions of various professional services to federal agencies. According to their corporate Web site, "GAITS is "an SBA 8(a) certified company providing a focused array of professional services which includes: verification and validation, information technology solutions, staff augmentation, program and administrative support, help desk services, and end-user support" (GAITS, 2007, p. 1).

Major vulnerability of Network Design to GAITS. In spite of Network Design's proven success using the Capability Maturity Model strategy to secure government contracts, this may not be enough to keep them on a competitive footing with GAITS in the future. As GAITS emphasizes, it uses processes and procedures that have been externally assessed under both SEI-CMMI and ISO 9001:2000 standards and the company has been certified: "The SEI CMMI-(SW) appraisal is held by only 110 companies in the U.S., of which GAITS is one. This, coupled with our ISO certification places GAITS in the elite 1% of federal government contractors who hold dual certifications, and is a testament to GAITS' commitment to quality for our customers" (GAITS, 2007, p. 2).

Some of the highlights featured on the corporate Web site maintained by GAITS include the following:

GAITS, Inc., Awarded a Five-Year Contract from the Department of Justice/Federal Bureau of Investigation (DOJ/FBI) to Perform Independent Verification and Validation (IV&V);

GAITS Awarded Task Order Supporting U.S. Air Force Office of Special Investigations (AFOSI) under the Multi-Operational Professional Services (MOPS) Contract;

GAITS Awarded Task Order Supporting U.S. Air Force - AF/A3/A5 under the Multi-Operational Professional Services (MOPS) Contract;

GAITS in Final Running for "50 Best Small & Medium Companies to Work for in America" Honor; and,

GAITS' External Customer Satisfaction Rating Reaches 98.57% (GAITS, 2007, pp. 1-2).

Potential marketing actions or initiatives by GAITS. Aristotle Onassis once observed that the secret to success was "knowing something the other guy didn't know," and it is always possible that Network Design's competitors, especially GAITS, may discern new trends in federal evaluation criteria used for awarding their product and service contracts. The more finely tuned bid applications are to such criteria, of course, the better the chances of securing these valuable contracts. To the extent that Network Design continues to keep attuned to these trends will likely be the extent to which it will be able to thwart the efforts by GAITS to intrude on its own market niche and create a significant barrier to entry for newcomers.

According to Kermally (2003), by using Porter's five forces framework, an improved analysis and understanding of the competition in a particular industry can be achieved: "In order to construct a competitive strategy, an organization needs to know what is likely to happen in the markets in which the organization delivers its products and services. It also has to know who its competitors are in a particular industry structure" (p. 58). To help accomplish this strategic analysis, it is useful to refer to the rules of the competition governed by five competitive forces as articulated by Porter in his five forces model, and these forces are applied to Network Design and its competitive environment in Table 2 below.

Table 2.

Porter's Five-Force Industry Analysis Worksheet.

Force

Overall Assessment

Analyses and Comments

Power of Buyers

Limited to contract amount and length which varies from project to project.

The federal government is heavily reliant on Network Design for the provision of custom services and support of its IRMIS application.

Power of Suppliers

Network Design has a competitive bidding edge for federal contracts by virtue of being women-owned.

Although Network Design has CMM, GAITS has ISO 9000 and may well have some similar competitive edge in the bidding process concerning minority- or women-owned status (this was unstated in their corporate literature, though). According to Barnes (2000), "The number of ISO 9000 registrations is doubling every nine to 12 months in the U.S., from 100 in 1990 to 4,000 in 1994 to 8,400 in 1995. It has been called the most influential single meta-standard so far, a movement toward global business requirements" (p. 11).

Threat of Substitution

Competitors such as GAITS can provide viable substitutes for virtually all of the products and services currently being provided by Network Design. As Porter cautions, "All five forces jointly determine the intensity of industry competition and profitability, and the strongest force or forces are governing and becoming crucial from the point-of-view of strategy formulation. For example, even a company with a very strong market position in an industry where potential entrants are no threat will earn low returns if it faces a superior, low-cost substitute" (quoted in Kermally, 2003 at p. 60).

In reality, developing a viable substitute for IRMIS would require a considerable amount of time and resources that would make the realization of this threat unlikely.

Threat of Entry

Barriers to entry for the types of contracts awarded to Network Design and its competitors are relatively high.

Research and development for IRMIS represented an enormous investment that was clearly geared toward securing future government contracts.

Internal Rivalry

None discernible from the corporate literature.

Overall Industry Assessment

Outsourcing remains a high priority in the federal government today and the provision of customized network solutions for the federal government appears to represent a growth industry in the future. As of the end of FY 1999, a total of $69 billion was subcontracted on federal contracts; of that total, $27.9 billion, or 40.4%, was subcontracted to small businesses. More than $4.5 billion was subcontracted to disadvantaged businesses; and $3 billion was subcontracted to women-owned businesses alone (Fisher & Williams, 2001).

In spite of the relative high barriers to entry, competition in this industry can be expected to remain fierce, with other women- and minority-owned start-ups seeking to capture part of the outsourcing action taking place in the federal government today.

Conclusion

Based on the foregoing considerations, it is reasonable to maintain that Network Designs will remain competitive and continue to secure lucrative government contracts in the future if it "rides the horse" that took them where they are today. By keeping their company women-owned and small, Network Design is able to achieve a competitive advantage in the bidding process for federal government contracts for the provision of customized network products, services and business solutions. Notwithstanding the competitive edge represented by companies such as GAITS that also use other management processes such as the ISO 9000 series to help them secure federal contracts, the combination of resources, professional experience, expertise and a proven track record in fulfilling government contracts in the past makes Network Design a formidable contender in the future.