Two years on from the move that saw Leidos merge with Lockheed Martin IS&GS, ADM Managing Editor Katherine Ziesing spoke with Chief Executive Christine Zeitz about where the business has come from and where it’s headed as it continues its transformation into a true systems integration business.
ADM: It’s been about two years since the Lockheed Martin IS&GS/Leidos merger; how has that bedded down? What’s the last two years been like?
Zeitz: Hectic. We’ve had the most amazing experience and I think, privilege, of setting up a new company with a very large base that supports Defence and Government in so many ways. So it’s like a start-up with a heritage of 20 years.
On day one we inherited about 750 exceptional people and we’ve now grown to 1,200, over 40 per cent growth in our first two years. We’ve moved from a very predominantly platform centric brand to a new Leidos brand focussed on systems integration through technology and engineering. As the original Leidos brand was less well known in Australia, it has been exciting to deliver the new brand and culture for Leidos Australia operations.
I think it’s important for people to understand that the merger in the US was 50 per cent Leidos and 50 per cent IS&GS. When the whole company moved to Leidos business systems this change impacted only 50 per cent of staff in the US. In Australia, the change of business systems impacted all of our staff (including the heritage Leidos staff based in Australia). So really a total change.
We’ve now successfully changed or transformed all of our business systems and processes; finance, supply, timesheets, payroll and project management. All this whilst significantly growing the new company through winning and mobilising new programs and completing a critical transformation program in Defence under Centralised Processing (CP) and continuing to service all our existing customers.
So, yes, it’s been very hectic but immensely rewarding for the whole team. We have now defined our culture as Leidos. We have a strong Australian executive team and exceptional staff.
ADM: Can you give us an update on your large defence programs such as CP (Centralised Processing) with CIOG? What does that cover? Where were you and where are you now?
Zeitz: The CP contract has three phases: the first phase in which Defence outsourced the support of the existing environment to us had commenced before the merger. The second phase was the transformation program which was transforming their extant legacy environment, refreshing it onto a new environment with standard patterns and that was halfway through when we merged.
It had got into a little bit of trouble during the merger period and it had gone a bit red, which was not where we wanted to be as Leidos. But happily as of December last year we met FOC and the ANAO audit on the final milestone was green. To get an ANAO green audit is quite outstanding for the whole team and was the result of a very strong partnership with CIOG.
FOC last December gave CIOG and therefore Defence an infrastructure platform that is refreshed, contemporary and in pattern. The idea being that you can then lower your cost of support and provide greater agility for the introduction of future requirements.
We’re now in phase three – the support phase. We are now able to work with Defence around contemporary solutions such as hybrid clouds. There’s a lot of discussion around public-private clouds, Microsoft Azure and AWS and we’re talking about that in our future planning with CIOG. So that’s CP, where we have consolidated 280 data centres into 12 domestic and three international modern data centres.
ADM: And obviously you’ve got a presence in the intelligence community as well on that ICT front?
Zeitz: Well, no, I wouldn’t call it just on the ICT front. Our total revenue is around $400 million in Australia. Half of this relates to ICT programs, so that’s the Defence ICT support as I just explained, and also we provide ICT support to the Australian Tax Office.
The other half of our business is what I would call ISR and systems engineering which we deliver into CASG projects and wider Government organisations. For example we deliver command/control systems for Headquarters JOC under JP2030 and provide support defence communication systems.
I am not able to speak about specifics of some of the work we do as many of our contracts have non-disclosure agreement for various reasons, but the majority relates more to ISR projects where hardware and software engineering is required to build complex systems. We have been involved in work on airborne platform and radar systems in the past and currently working on integrating sensor and communication equipment in the maritime arena.
ADM: How do you deal with that transition in focus and the culture for programs like JP2060, Land 2110 and shaping towards Land 3025?
Zeitz: The CP program is an ASDEFCON program and was bid like any Defence program. So the Leidos Australia business is used to dealing with large complex Defence programs. We position ourselves in the market as a systems integrator. We are a systems integrator in the ICT space, we bring in the products and capabilities from other players like Dell, Netapp and Cisco as our partners.
On the Defence mission systems similarly we don’t make products, we are the systems integrator bringing in partners who have the critical products required and integrate them into our solution.
So it’s interesting you’re asking how we move from ICT to Defence – we’re already in Defence as a systems integrator. At Leidos we’re actually saying how do we move from Defence into other federal agencies? So we’re exploring. We’ve just got our first contract with Department of Home Affairs to provide a flexible partner engagement. The section we’re working with at the moment is an immigration systems section. We’re doing business analyst work for their new system and planning out some new projects for them.
The strategy is to get at least one more federal agency as a customer. We are extremely focused. When we go to Home Affairs or Human Services, we’re saying we’re here, we know how to deal with large government agencies, large programs, large systems integrations, maximise supply chains and we deliver. That’s our proposition.
ADM: At Land Forces in September you announced the contract for Land 2110 has been signed, after two years of negotiation. What will that contract cover and how are you engaging with SMEs to fulfil your AIC obligations?
Zeitz: We are always extremely focused on AIC. In terms of sustainment for Land 2110 we’re at 80 per cent Australian company involvement. We have developed an integrated system solution which includes materials and devices some of which are sourced overseas but we are partnered with a number of Australian companies such as J3Seven and ECLIPS who are delivering world class products. We’ve set up many sustainment contracts with SMEs to support our solution.
ADM: How would you characterise the defence ICT environment? We had a former Minister who referred to Defence ICT as 'quite retro' in 2016. Do you think it has moved on since then?
Zeitz: I think so. In my own history, 28 years now working with Defence in Australia, out of country a couple of times, it’s been the last three years as the first time I’ve worked with CIOG. So it’s always been about DMO/CASG and my observation is that CIOG have got a really hard trek. The investment in the core infrastructure has now been done, the ISR backbone investment under JP2096 is approved, and that is important.
The ongoing investment in ICT is the most important part of our defence network-centric warfare. It’s fine to have a ship or submarine, and the combat management system is incredibly important, but your repositories of data and how you connect them and how you get information to the war fighter to make a decision is the key. That’s our space.
Whether it’s CIOG or across core defence, like mission systems, platforms or HQ JOC, that ICT layer is so critically important. We’re seeing enormous amount of budget expenditure going to those weapon systems, which is understandable. I’d like to see a bit more investment going into the enabling ICT programs that underpin these programs, which the IIP did identify.
It’s a call to recognise the absolute imperative importance of ICT as a foundation of so many of our current and future capabilities.
ADM: Given the workforce constraints Australia is facing in terms of STEM centric skills, what plans to do you have in place to address that?
Zeitz: We are diversifying where we are located. So when I arrived we had the majority of the workforce in Canberra and a smaller workforce in Melbourne. We have strategically grown our Melbourne workforce. Melbourne is a city of 5 million people, Canberra is a city of 400,000 people in terms of the raw numbers related to the respective talent pools.
When we separated from IS&GS we lost access to many of the back of house functions to run a company. We’ve had to set up all our own functions including legal, corporate, HR, payroll, IT helpdesk, HR helpdesk; all of the supporting functions a company needs. We’ve strategically done this in Melbourne.
So, firstly, our hiring location has been thought about. In terms of development of staff, we employed 30 graduates in 2018 and expect to hire around 40 new graduates in 2019. We’re committed to developing our people and growing our graduate intake.
And then we have, as you’d expect from me, a large focus on diversity of gender. We have been putting a ‘gender filter’ on our recruitment ads and by changing the language we have doubled the number of female applications we are receiving. We’re doing some activities under the diversity and inclusion banner to access not only in the cities but the aperture around attracting more people of a diverse nature, not just gender, into our business.
ADM: How has the policy landscape over the past two years affected your day to day business?
Zeitz: At the highest level the First Principle Review recognising industry as a fundamental input to capability, has helped. I’ve seen, as others have seen, across the management of CASG, CIOG and intel, that there is a forward leaning into industry that I think has come from the policy changes – that’s a big tick.
In terms of Smart Buyer (being quicker, faster), I’ve seen the large programs getting that focus and I think the First Principles is showing that they can move large programs and hit their plan for RFTs out, issue, decision, contract. I don’t think that’s filtered down to the mid-tier programs, the between $100-$300 million programs. We haven’t yet seen the improvement from the First Principles review around timeliness, from our point of view in that space.
ADM: Why do you think that is?
Zeitz: I think there is a pressure on resources in our customer community and we’re starting to see that. It’s not by design or lack of decision making, I don’t think. It’s actually from the work that has to be done to either review a tender or put a business case together and get it through the system. I just think that they haven’t got the people and the capacity to do it.
The AIC piece I think is heartening and Leidos Australia is taking the lead with this – it’s a space that this company always operated quite well in.
The number one best thing about First Principle Review was the stand-up of the Joint Command and so now those programs, which we we’re very interested in, have a capability manager.
ADM: Do you think there is blurring of above and below line work; is that framework still relevant?
Zeitz: We don’t operate above and below the line, so for me I don’t really think so much about it. We operate below the line and if I sit back and look at what’s going on with that capacity of workforce, having such pressure, and I think what they did around the MSPs (Major Service Providers) was really sensible.
To say, ‘right, so we’re going to be going to consultants, let’s at least go to market and get some good partnerships and put that in place’ – that’s very sensible – and I think that they believe that they’ve got some good economies out of that.
I’m not going to give a view about it but it’d be interesting to see those companies that are those MSPs, how do they then participate below the line and is that defined? Is it not? And because I’m not involved up there I’m not really exercising my mind too much about it because we’re operating below the line only. The fight for talent, particularly in Canberra, is an issue that every company faces.
ADM: What are the challenges and opportunities in the short medium and long term for the business?
Zeitz: In terms of the strategy, we want to grow in the Defence areas that we believe we can pull capability from the US and to be a recognised technology and ICT systems integrator across Government. In core Defence programs that’s JP 2060 Phase 3, which I think we’ve put a superb bid in, the deployable hospital, and then JP 2060 Phase 4 for the electronic health record of the hospitals which is what Leidos does for the US. We run the biggest electronic health records defence program in the US, so our credibility is very strong in that space.
The other program in Defence is the command and control system for HQ JOC under JP 9111, which is the next generation, is very much in our mind and we’re working on that. In terms of ISR, we are still in competition for JP 2096. We’re hoping that will come to a conclusion soon. That’s such a tremendous strategic capability. The integration and search functionality under that program; it’s so incredibly exciting for Defence because it gives a portal.
At the moment if you’ve got to search P-8A data, you go into the P-8A repository and you’ve got to copy over to another system. The bandwidth demand alone isn’t great. You go into Wedgetail, or any other platform generated data; they’ve all got their own repository. So JP 2096 interfaces into the repositories, will allow the operator to search in a single system across a range of assets (stills, video, data) and then do what you need to. The efficiency that it opens up is just amazing in terms of rapid response, search, bandwidth, is really critical capability.
Obviously the intel space, we can never talk about it but we’re growing in there. And as mentioned earlier, other federal agencies across our full range of capabilities both in Australia and supported by reach back into our US parent.
This article first appeared in the November 2018 edition of ADM.