Analysts International Corporation History

Company Perspectives:

Whether you're looking to tie the mission-critical legacy systems in your B2B eCommerce hub to a brand-new web front-end or simply have to find a world-class project manager to lead an eBusiness team, you can rely upon Analysts International. We help companies plot a course that can deliver long-term, tangible dividends. From eCommerce strategies and rapid application development, to technical staffing and managed services outsourcing, we create the well-defined support our clients need, where and how they need it. Key Dates:

Key Dates:

1966:

Analysts International Corporation (AiC) is founded in Minnesota by Frederick W. Lang.

1969:

AiC acquires United Capital Investors Co. and uses its office building as headquarters for 30 years.

1970:

AiC enters into a contract with General Motors to provide contract programming services.

1976:

AiC stock begins trading on NASDAQ.

1990:

AiC's revenue tops $100 million.

1995:

AiC signs a three-year contract with US West.

1999:

AiC moves to new headquarters in Edina, Minnesota.

2000:

AiC purchases majority stake in Sequoia Diversified Products, which becomes SequoiaNet.com.

Company History:

Analysts International Corporation (AiC) describes itself as 'a premier information technology services company serving more than 900 corporate and governmental clients.' Established in 1966 to provide contract programming services, AiC has expanded its information technology (IT) services to include electronic commerce and eBusiness solutions, technical staffing, information management, mobile business computing, and digital asset management, among others. Its client base includes a range of old and new economy companies in nearly 20 different industries. Its two biggest clients, US West and IBM Corporation, account for about 40 percent of its revenue. AiC employs more than 4,000 IT professionals--whose services are billable to client organizations--in 45 markets in the United States, Canada, and the United Kingdom.

Focusing on Contract Programming: 1960s--70s

Analysts International was formed by Frederick W. Lang in 1966, with offices in a carriage house behind his home in Minneapolis. In its first year the firm opened offices in Minneapolis, Los Angeles, and Washington, D.C. Victor C. Benda joined the firm and later became president of the company. The company's stock was initially traded over the counter. By 1969 revenue had reached $1.6 million. In 1969 AiC acquired United Capital Investors Co. and used its office building as corporate headquarters until 1999.

In 1970 AiC negotiated a national agreement with General Motors. For the next several years AiC would be one of the largest suppliers of outside programming services to GM. AiC had more than 100 clients in 1970, and by 1973 had a staff of more than 100. One project involved developing programs for the U.S. Army's anti-ICBM missile systems at Huntsville, Alabama. In 1976 AiC stock began trading on the NASDAQ. At the end of the decade revenues were $12.3 million. The firm had expanded nationally and adopted a regional management structure.

Rapid Growth in the 1980s

In 1981 Forbes magazines spotted AiC and named it one of the 'Up and Comers.' Inc. magazine listed AiC as one of the top promising small growth companies. Revenue reached $23 million, and the firm's national staff grew to 560. By 1988 the company's staff exceeded 1,000, and it had more than 400 active clients. Business was being conducted from 17 branches.

Between 1986 and 1989 AiC's revenue grew at a 24 percent compound annual rate, from $46.7 million to $89.9 million. One analyst predicted AiC's revenue would grow by 15 percent a year in the early 1990s. The company's revenue and earnings growth as well as its debt-free balance sheet made it attractive to investors. All of AiC's growth came about internally rather than through acquisitions.

Benefiting from Industry Outsourcing: 1990s

During the early 1990s AiC benefited from increased outsourcing, as many of its clients downsized in tight economic times. For fiscal 1991 ending June 30 AiC had revenue of $116.8 million, up from $107.8 million in fiscal 1990. The company had more than 500 active clients, including many who were with the company since its first five years. AiC was ranked 54th on Business Week's list of the '100 Best Small Companies.' The firm had a staff of 1,700 and 22 branch offices.

For fiscal 1992 revenue rose 10.9 percent to $130 million. The number of employees increased from 1,750 to 2,070. For several years the company was able to support the growth in its business with internally generated funds, so it dropped its line of bank credit at the beginning of the year. Capital expenditures were limited to expanding and remodeling some of its 24 branch offices. During fiscal 1992 AiC established a southern regional headquarters in Atlanta.

In the mid-1990s four major lines of business were implemented: Solutions, Professional Consulting, Technical Staffing, and Managed Services. The company's Managed Services Group, established in 1997, was responsible for managing the systems analysts, computer programmers, and other technical personnel who were on assignment with AiC's clients. Starting in 1995, AiC had more than 1,000 programmers and other technical personnel on assignment at US West, the firm's largest customer. US West accounted for about 22 percent of AiC's revenue in the latter half of the 1990s. The company's second largest customer was IBM, for which AiC provided services through 30 branch offices as part of IBM's National Procurement initiative. IBM accounted for 16 to 20 percent of AiC's revenue.

Revenue for fiscal 1997 was $440 million. After 1997 AiC established additional new national practices: eBusiness, Rapid Application Design and Development (RADD), and Lawson Software. Mike LaVelle was promoted from regional vice-president to president and COO.

AiC first partnered with Lawson Software in 1995, when Lawson established its partner program, Global Alliance Integrated Network (GAIN). AiC provided technical support for Lawson and its clients internationally, in Europe, Africa, South America, Canada, and the United States. AiC's Lawson Software Practice was focused on helping customers implement their Lawson enterprise resource planning software. AiC maintained three fully staffed centers in the United States to assist Lawson with its latest product developments.

Between 1997 and 2000 AiC's eBusiness services developed into a wide range of e-commerce solutions, from front-end web development to back-end systems integration. Rapid Application Design and Development (RADD) formed a key component in the company's overall eBusiness strategy. RADD is a rapid prototyping methodology that enables client companies to implement eBusiness solutions quickly and efficiently.

Y2K, Electronic Commerce: 1996--2000

Around 1996 companies anticipated having Y2K problems with their computer systems. During 1997 Wall Street thought that computer services companies would benefit from Y2K concerns, and AiC's stock doubled in price. In 1998 the company's stock was affected by economic uncertainty in Asia and other world markets, as well as by missed earnings targets. Early in the year AiC stock was trading around $37. When its quarterly results for September 1998 failed to meet Wall Street's expectations, the already declining stock fell another 30 percent to around $18 a share. The stocks of computer services companies in general were losing ground, largely because of concerns over global economic conditions.

For fiscal 1998 ending June 30 AiC had revenue of $587.4 million. Revenue had grown 29 percent compounded annually for the past five years. By 1999 Wall Street was looking unfavorably on stocks of computer services companies, because it thought that they would lose a lot of Y2K business once the fixes were put in place. In addition, many companies were delaying the implementation of computer projects until the year 2000 to avoid additional compliance issues.

For fiscal 1999 AiC had revenue of $620.2 million. During the year AiC experienced a temporary but dramatic change in its clients' spending pattern. The company's revenue growth slowed as clients worldwide focused on finalizing their Y2K initiatives, often using inhouse staff for testing. Many companies were also deferring new projects until the year 2000. In 1999 AiC consolidated its three locations in the Minneapolis/St. Paul area into a new headquarters in Edina, Minnesota.

In 2000 AiC acquired Sequoia Diversified Products, which changed its name to SequoiaNet.com in mid-2000, from parent company Panurgy Corp. of Columbia, Maryland, for $43.5 million. For 1999 Sequoia, which was founded in 1990, had revenue of $57 million. Sequoia had more than 500 employees and was based in Auburn Hills, Michigan. AiC acquired about 80 percent of the company, with the remainder retained by Sequoia's founder and president John Bamberger and the firm's management team. Sequoia would continue to operate as a separate subsidiary of AiC and provide web hosting and development services as well as business reengineering and marketing services. Bamberger also became a vice president of AiC and reported to AiC president Mike LaVelle. The acquisition was part of AiC's strategy to strengthen its position in providing e-commerce solutions.

In June 2000 it was revealed that Minnesota entrepreneur Rick Born had bought a 5.8 percent interest in AiC. Born was the founder of Born Information Systems, an information technology consulting firm that Inc. magazine ranked as one of the fastest-growing private companies in the mid-1990s. Although Born's purchase spawned rumors of a possible takeover, Born insisted it was simply a good investment and that he had no intentions of mounting a takeover bid for AiC.

For the future, AiC's strategy included strengthening its e-business and e-commerce consulting business, which offered higher margins, and placing less emphasis on low-margin businesses such as technical staffing. The acquisition of SequoiaNet.com added some 420 technical consultants experienced in e-business network infrastructure. In mid-2000 AiC announced the establishment of its Enterprise Consulting eBusiness team, which would be based in Raleigh, North Carolina, and headed by AiC's executive consultant Brad Bradstreet, formerly the chief architect behind IBM's eBusiness infrastructure.

For fiscal 2000 ending June 30, AiC's revenue dropped nearly ten percent to $558.7 million. Net income declined from $22.7 million in fiscal 1999 to $9.8 million in fiscal 2000. Despite the impact of Y2K on AiC's clients' spending, the company remained profitable and was poised to take advantage of anticipated growth in the IT services market over the coming year. AiC had strong customer relationships with more than 900 clients worldwide, including many Fortune 500 companies.

Principal Subsidiaries: SequoiaNet.com.

Principal Competitors: Cambridge Technology Partners, Inc.; Computer Task Group; CGA; Keane Inc.; Computer Horizons Corp.; Andersen Consulting; IBM Corporation.

Further Reading:

• 'Analysts International Corp.,' Corporate Report-Minnesota, July 1990, p. 100.
• Arginteanu, Judy, 'Analysts International Corp.,' Minneapolis-St. Paul CityBusiness, January 14, 1991, p. 29.
• Beal, Dave, 'Saint Paul Pioneer Press, Minn., Dave Beal Column,' Knight-Ridder/Tribune Business News, January 24, 1999.
• Carlson, Scott, 'Edina, Minn., Consulting Firm's Stock Takes Hit,' Knight-Ridder/Tribune Business News, October 13, 1998.
• ------, 'Minnesota Software Firm's Niche Is the Year-2000 Computing Fiasco,' Knight-Ridder/Tribune Business News, May 21, 1996.
• Hoogesteger, John, 'Born Acquires 5.8 Percent of Analysts Stock,' Minneapolis-St. Paul CityBusiness, June 23, 2000, p. 33.
• O'Shaughnessy, Maryellen, 'Software Firm Makes Big Plans for Growth,' Business First-Columbus, September 30, 1991, p. 5.
• Parsons, Martha, 'The Benefactor,' Corporate Report-Minnesota, October 1998, p. 43.
• Rosa, Jerry, 'Sequoia Changes Name, Shifts Focus,' Computer Reseller News, June 5, 2000, p. 22.
• Solberg, Carla, 'Analysts International Corp.,' Minneapolis-St. Paul CityBusiness, October 30, 1992, p. 28.

Source: International Directory of Company Histories, Vol. 36. St. James Press, 2001.