Perot Systems Corp.: Stepping Into Bigger Shoes

Perot Jr. takes the reins and steers the company toward opportunity.

Not withstanding the challenge of having to fill a pair of big shoes, compounded by running a company amidst an economic downturn, Ross Perot Jr. is an optimist.

At the helm of Perot Systems for about six months, Perot hasnt had much of a honeymoon, to say the least. But he has put in place an aggressive plan to get the company back on track.

A New Campaign Trail Perot says he feels comfortable in his new role, which he assumed last September, as president and CEO of the company started by his father, Ross Perot, the former presidential candidate for the Reform Party. The younger Perot has been on the companys board of directors since it was founded in 1988.

Perot says his appointment gives his father, who is chairman, time to schmooze with customers, to close deals and to drum up business. "He is still very active in the business. When I took over six months ago, I freed up a lot of my fathers time to go out and be very active in the business," says Perot. "[He gets to] really spend time with our customers and work on new prospects, which is what he loves to do."

Revised Platform Perot Systems in January announced a realignment that led to the shutdown of certain unprofitable practices, the layoff of 200 employees, and the creation of a global delivery model for its three main vertical practices: health care, finance and manufacturing. The company has 55 U.S. locations and has a hand in seven other countries.

A fourth, smaller vertical practice called "emerging markets" cradles business units that have not yet reached critical mass, such as telecommunications, energy, and travel and leisure. The practice leaders of all of those units have been encouraged to grow their businesses into verticals.

The final part of the realignment created three horizontal practice areas in business consulting, software engineering and integration, and technology infrastructure services integrated into the vertical practices.

Too Much Kool-Aid Coming out of 1999, Perot Jr. admits the company could have better positioned itself for stronger growth last year, but says it "drank the Kool-Aid" in believing that a floodgate of legacy-integration work would open after year 2000 bug fixes.

The company saw a drop in revenue last year—to $1.105 billion from $1.141 billion in 1999—due to a decline in work from two of its larger customers. The company derives 45 percent of its revenues from its top five customers. However, it has no debt and has about $240 million in cash.

While Perot Systems expects flat growth for its Q1 period, it expects 15 percent growth year over year. Part of the growth will come from its acquisition late last year of Health Systems Design Corp., a vertical integrator. In January, it also acquired the assets of Covation, a health-care ASP.

Health care is one of the areas the company expects to grow the fastest, says Jim Champy, VP of strategy at Perot Systems.

Perot Systems also may seek an IPO this year for its India-based subsidiary, HCL Perot Systems, which offers offshore software development.

While other IT companies are battening the hatches, Champy sees opportunities. "We believe there is a huge backlog in IT services," he says.

Overall, despite the companys challenging year, Perot remains positive. "We are seeing a demand for outsourcing services in the later part of the year," he says.