Solving Here-and-Now Problems Someplace Else
It's called E-ZPass, but the toll system used in New Jersey made the state's turnpikes more like a highway to hell. Instead of stopping and tossing change into a basket, the system was designed to speed up traffic by charging drivers via an electronic reader while they cruised through a toll booth. But E-ZPass sent out 300,000 faulty violations a month, amassed a $469 million deficit in four years, and was investigated by legislators for cost overruns. Last July, the state fired its old contractor and hired Affiliated Computer Services (ACS ) Inc. (No. 72) to take over the toll booths.
Now, E-ZPass' operations are as smooth as freshly laid blacktop. The faulty fines are gone. An express service later this year will let drivers race through the toll booth at 60 mph. And costs are under control. "[ACS] is going to save us millions of dollars annually," says N.J. Turnpike Authority Executive Director Michael Lapolla.
Thanks to satisfied customers like New Jersey, ACS is one of the leaders in the market for business process outsourcing (BPO), in which companies farm out entire tasks to specialized firms. Besides toll collections, ACS takes over such jobs as accounting and medical claims processing for clients, ranging from Motorola Inc. to the U.S. government. Seventy percent of its $3 billion in sales comes from BPO work, a higher percentage than any other major player. "We're taking an area of the economy -- the services sector -- and making it more competitive," says Jeff Rich, CEO at ACS.
A key ingredient of the ACS formula is cheaper overseas labor. In 1997, ACS opened its first foreign facility, in Mexico. Today, it operates in eight countries, including Ghana, Barbados, and India. Overall, 30% of ACS's 40,000 workers are based overseas -- a far higher percentage than most of its U.S. rivals. ACS has "the most advanced offshore capability, which gives them a price advantage," says Goldman, Sachs & Co. analyst Gregory Gould.
That advantage shows up on the bottom line. Goldman Sachs estimates ACS's sales will grow 26%, to $3.9 billion this year, with net income surging 33%, to $305 million. To keep ACS rolling, Rich plans to find more non-U.S. customers, shift more resources overseas, and further develop software that automates business operations. He seems to be on track. Just ask New Jersey commuters.
By Spencer E. Ante