San Diego Business Journal

CARLSBAD , With a panel including such business giants as the chairman of Compaq Computers and the president of Hewlett-Packard, some people attending Red Herring Communications' conference wondered why the keynote speaker came from outside the private sector.

But once Secretary of the Navy Richard Danzig began his speech at the third annual business technology conference Oct. 30 in Carlsbad, it became clear the armed service would soon operate in a very corporate fashion.

"We booked him because we've done a series of interviews with him, and we wanted him to share his views about the strong parallel of the Navy being run like a business," said Pete Henig, senior editor for San Francisco-based Red Herring magazine. "The Navy is the world's largest company, with the highest stake at risk."

Danzig told the crowd of high-tech executives, lawyers, bankers and venture capitalists that a recently signed contract will make it possible for the Navy and Marine Corps to operate more like a large corporation.

The new system, called the Navy-Marine Corps Intranet, will allow communication among the 900,000 people in both branches worldwide, he said. It will be administered by Electronic Data Systems Corp. (EDS) of Plano, Texas, and is said to be worth more than $6.9 billion over the next five to eight years.

The contract was issued by the Navy's Space and Naval Warfare Systems Command (Spawar) in San Diego.

The EDS-led contracting team includes Raytheon Co., MCI WorldCom, WAM!NET, Dell, Cisco and Microsoft.

San Diego will house the project's program management office. It will be one of six network operations centers and will also house a call center and help desk.

It is estimated that between 1,200 and 1,800 EDS employees will be based in San Diego.

The system is expected to be fully integrated by June 2003.

"We have 200 separate networks in the Navy and Marine Corps, and there was no single system where everyone could talk to everyone else," said Danzig, who took over his position in November 1998. "We realized this was a very un-economic thing to do.

"A single entity would give us a view of the entire organization that we were lacking."

Danzig said the Navy currently spends about $1.6 billion a year for information services. The unified system will cost about $800 million a year to operate but improve effectiveness at the same time, he said.

Danzig told the audience they should not be interested in the contract simply because of its size. But, he said, they should monitor the recent actions because the government could one day be one of their customers.

"What happens in your industry is you have created something new by leaving an old organization and taking your vision and drawing people to it," he told the crowd. "The Department of the Navy can't go out and create a new Navy and leave the old."