US-headquartered defence IT specialist Leidos could be leveraging the phenomenal growth it has seen in the Australian market as a springboard for an expansion across the broader Asia Pacific region.
The multibillion-dollar merger between Leidos and Lockheed Martin’s government IT services business in 2016 saw Leidos Australia grow almost overnight from a 60-strong tech player to a firm with almost 800 people under its belt.
The merger also saw the local Leidos brand instantly become one of the largest prime systems integrators servicing Australia’s federal public sector market.
Since then, the company’s Australian operation has carved out what seems to be a relatively extreme niche for itself, with a strategic focus on just a small handful of major federal government entities, including the Department of Defence (DoD) and the Australian Taxation Office (ATO).
Indeed, Leidos is working with Fujitsu and US-based partner KBR on a three-year, A$175 million program to upgrade and modernise IT and communications systems for the DoD.
The program will see Fujitsu, KBR and Leidos support about 70,000 users including troops in the field, ships at sea, and joint headquarters and support bases deployed domestically, regionally and globally.
So successful has Leidos been in Australia that, in 2020, between 45 per cent and 50 per cent of the company's US$1 billion in overseas sales revenue derived from the country, according to John Caucis, senior analyst at industry analyst firm Technology Business Research (TBR).
Further, Leidos’ 2020 increase in international revenue, up 17.5 per cent year-to-year, was driven largely by aggressive growth in Australia, Caucis said, claiming that the company was primed for continued rapid expansion in the country and across APAC more broadly as it leverages Australia as a staging point and case study for future regional expansion.
Caucis also noted that Leidos was opening a new software development factory in Melbourne that will create 100 or more IT jobs and will be the company’s first such facility outside the United States – another sign, he said, that the company expects steady growth in Australia for many years to come.
“Leidos has a 20-plus-year history serving clients in Australia, including the national government and provincial authorities, the nation’s healthcare sector, the intelligence community, and the country’s border defence agencies,” Caucis said in a blog post, suggesting Leidos was well positioned to take advantage of some of the latest investment pledges by the federal government.
“In 2020 Australia Prime Minister Scott Morrison affirmed over A$270 billion (about US$190 billion) in new defence outlays over the next decade, including defence IT modernisation and upgrades to weapons platforms,” Caucis said, pointing out that this spending comes amid a backdrop of Australia’s relations with China becoming increasingly strained in recent months.
“Leidos is ideally positioned to capture a large share of the expected budgetary investments to modernise defence platforms and civilian IT infrastructures,” he said.
From Caucis’ perspective, Leidos’ Australian operations make the company relatively unique among top-tier federally centric IT integrators and professional services vendors, at least regarding the scale and tenure of its business in the Australia and New Zealand region.
For example, Raytheon Intelligence & Space – another major defence contractor – derives nearly 40 per cent of its US$19 billion backlog from international markets and 12 per cent of its total revenue (about US$800 million in 2020) from APAC (not exclusive to Australia).
However, Raytheon does not provide traditional enterprise IT services to the Australian government or other foreign government clients in the region, Caucis said.