"homeland security" -- the brand -- for sale

[Dave Farber <dave () farber net>]

http://www.washingtonpost.com/wp-dyn/articles/A14902-2003Apr12.html

Homeland Security for Sale
Firms Shift Focus To Capitalize on Defense Spending

By Michael Barbaro
Washington Post Staff Writer
Monday, April 14, 2003; Page E01


When North American Access Technologies Inc. debuted its mobile emergency
command center in Washington three months ago, federal officials liked just
about everything they saw: the concept (a converted 20-foot-long box truck),
the equipment (on-board computers, Ethernet, telephones) and the price
(about $100,000). 

Their only beef was with the name.

"We were selling it as a disaster-recovery solution but they strongly
suggested we call it homeland security solution," said Julius N. Neudorfer,
director of network services at the Hawthorne, N.Y., company. He happily
obliged, revising billboards and brochures in time for an information
technology exposition last week at the Washington Convention Center. "I hate
to be blasé, but we just listen to what they tell us."

Homeland security. First there was the agency. Then there was the
department. Now there is the brand.

Nineteen months after the Sept. 11, 2001, terrorist attacks, thousands of
small and midsize U.S. companies like North American Access Technologies are
rearranging priorities, renaming operations, repackaging products, and more
or less reinventing themselves to cash in on what they hope will be hundreds
of billions of dollars in new spending on domestic defense.

Locally, Presearch Inc. of Fairfax is trying to persuade the federal
government to install the company's dial-up video technology, now used to
catch shoplifters inside CVS pharmacies, on board thousands of airplanes to
monitor cabin security. Human Genome Sciences Inc. of Rockville, best known
for helping unravel the human genetic code, is hoping to win a government
contract to produce an antidote for anthrax. And Juldi Inc. of Herndon,
which has never worked with the government, is pitching its software as an
ideal tool for integrating sensitive computer systems in the defense
community.

Publicly, many of these companies characterize the sudden shift as a civic
-- if not patriotic -- duty. Privately, they say it is a savvy business
tactic. At a time when capital markets and venture capitalists have all but
sealed their vaults, government research and purchasing money for domestic
security is more or less immune to the economic slowdown.

The Homeland Security Department's requested budget for 2004 is $36.2
billion, a 7.4 percent increase from fiscal 2003. Of that, an estimated $800
million is designated for science and technology, which could help prop up
three sectors of the economy -- biotechnology, telecommunications and
software -- that were among the hardest hit after the dot-com crash.

As a result, industry and government officials said, homeland security is
luring as many cash-strapped charlatans as it does cutting-edge innovators.

"There is a lot of junk out there," said Ronald J. McKenzie, senior vice
president of Presearch, which is partnering with Verizon Communications Inc.
to sell AirPics, a wireless video surveillance system. He has come up with a
name for the duds, "bleeding-edge technology," which can cost
undiscriminating clients millions of dollars. "Homeland security," McKenzie
said, "is full of bleeders."

Like just about everybody else in the burgeoning homeland security sector,
McKenzie declined to name names. But with so many companies vying for the
same contracts, backroom sniping about the competition is becoming more
common, particularly on the convention circuit.

"Simply the best and most powerful encryption solution in the world," read
the banner for Washington-based software maker Meganet Corp., which set up a
booth inside the Homeland Security Pavilion at FOSE, the information
technology convention hosted last week by PostNewsweek Tech Media, a
subsidiary of The Washington Post Co.

Meganet has just introduced the VME BioDrive, a fingerprint identification
system designed to limit access to computer files. Should anyone doubt it
was the best of its kind, the company's attorney, Ralph L. Lotkin, was on
hand to explain that a competitor's version has "electrostatic problems."

The conventions themselves are powerful evidence of homeland security's new
allure. Vice presidents of homeland security divisions stand behind booths
describing homeland security technology that would be ideal for, say, the
Homeland Security Department.

"If you wanted to spend the next 100 days at homeland security conferences,
you could do it," said Stephen W.T. O'Keeffe, founder and president of
O'Keeffe & Co., a high-tech advertising firm in McLean.

Officially, at least, the Department of Homeland Security is grateful for
every idea that comes its way -- about two dozen a day through e-mail and
telephone, said Alfonso Martinez-Fonts Jr., special assistant to the
secretary for the private sector. Most pitches begin with an age-old ploy:
"I recently met with the secretary; I know the undersecretary." There's no
way to really check, so he listens politely.

Three-year-old Juldi is tossing its hat into homeland security because the
alternative for a money-hungry software start-up -- venture capital funding
-- would cede too much corporate control to professional investors, said
chairman and chief executive Irfan Ali.

Not everybody, of course, is a new arrival to the domestic security market.
Industry experts say the more established government contractors, many of
whom shun the convention scene, are quietly gobbling up contracts based on
existing relationships with federal agencies. Homeland security is the
fashionable brand, they say, but the work remains basically the same.

Software giant Oracle Corp. of Redwood City, Calif., says it hasn't bothered
with a flashy campaign to lure new government customers. Nevertheless, the
Transportation Safety Administration, created shortly after the Sept. 11
terrorist attacks, has already adopted its financial management software,
previously in use by the Department of Transportation.

"The government is looking for solutions rather than component parts," said
Steven R. Perkins, a senior vice president at Oracle and head of its
homeland security division. New players "who have one piece of the puzzle
are not going to help the cause dramatically."

When it comes to new players, measuring the effectiveness of homeland
security products can be difficult. Many have no track record with the
government. Others have not yet commercialized their technology. In either
case, a company is at a distinct competitive disadvantage, industry experts
say. 

Compelling test data of any kind helps. Human Genome Sciences, for example,
can point to detailed testing that shows its anthrax antidote is effective
in animals. It plans to apply for funding to manufacture the drug under
President Bush's proposed $6 billion biodefense program, code-named
Bioshield. 

The company's early experience illustrates another incentive for publicly
held companies to invest in homeland security: Its stock shot up more than
30 percent the week it announced the drug.

Then there is North American Access Technologies. Before the Sept. 11
terrorist attacks, the company offered computer networking services. Today,
it also sells a crisis-management center on wheels. The company says the
vehicle employs "ruggedized, high-density systems" and can host "multiple
terabytes of data." But there is no way to test its performance after, for
example, a nuclear dirty bomb is released until such an attack occurs.

Or there is Tripod Data Systems of Corvallis, Ore., a unit of Trimble
Navigation Ltd., which makes a $1,500 handheld computer called the Recon.
The company says the 17-ounce device is waterproof, with internal parts
sealed; can operate in an environment 22 degrees below zero; and can
withstand a four-foot fall 26 times.

What makes this handheld computer a better homeland security device than,
say, Compaq's, Toshiba's or Microsoft's?

Says sales representative Peter Kimura: "It's much more rugged." 

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