Chance, risk taking and service power Germane Systems

by Heather B. Hayes
for Virginia Business
May 2006

Marc Green, CEO of Germane Systems, says he didn’t plan for great success in the manufacturing industry. He started his Chantilly-based company in 1998 as a training consultancy, but, because he had a knack for rebuilding PCs and components, he soon began receiving requests for small hardware projects. By the end of the year, the company had revenue of $650,000 from its moonlighting venture.

Today, Germane Systems is a major original equipment manufacturer of high-end servers for mostly military and government customers. The company grew 1,286 percent from 2001 to 2004, making it the best-performing manufacturer on the Fantastic 50 list. Green expects revenues to reach close to $35 million in 2006.

Amazingly, given such large numbers, Germane Systems until last year had never had to rely on bank financing and, in fact, has never completed a business plan for its hardware business. “We’re completely free to take risks and run the business as we see fit,” says Green, whose wife, Kerry, serves as president and oversees all of the back-end operations.

The company, which has 75 employees and plans to add another 15 this year, certainly doesn’t shy away from taking risks. Its servers exceed the temperature, vibration, impact and performance specs required by most customers. The company also absorbs all engineering costs rather than passing them on to the customer. “We’ve been told by military procurement people that we’re a paradigm breaker,” Green says, noting that its early focus on military projects gave it even more impetus to push the size, capacity and processing ability of its products.

Germane’s approach results in huge financial savings to its customers, faster procurement cycles and better performance. A military study found that in 2000 the Department of Defense was paying $30,000 to $35,000 per server; with Germane, it pays just $4,000 to $6,000.

Germane’s servers are exceptionally rugged. They endure heat as high as 120 degrees Fahrenheit, survive in ship environments and last as long as four years. Because the servers are “commercial off the shelf” products, new designs can be delivered in three to four months, rather than the typical 18-month procurement cycle involved in contract-negotiated purchases. “We’re buy and use,” says Green. “They’ve also told us point blank that it isn’t just the hardware we’re building that keeps them coming back, but it’s the total value-add solution that we provide.”

Germane services include configuration management and obsolescence management, which, Green says, “helps keep the product available for years when normally it goes out of service in two or three quarters.”

The military makes up 85 percent of Germane’s customer base, with most of its servers used in submarine and ship programs. Recently, the company won the lead position for the 2006 bi-yearly technology insertion for the Navy Sub Sonar program, a position it also won in 2002 and 2004. Green says this win, and others, will position the company to grow to at least $50 million over the next 18 months.

The next two years are an especially critical time for Germane. The company, which last year moved into a new 61,000-square-foot facility, plans to expand its offerings through four divisions: a military division that will continue to provide rugged servers; a commercial sales division and federal civilian sales division, both of which will be focused on delivering integration services for conventional, non-rugged servers; and a fast prototyping and engineering services division, for which Germane has already invested almost $1 million of facility and laboratory equipment.

“We’re just going to keep doing what we do well and move that expertise and approach into other markets,” Green says. “I’d say our future looks extremely bright.”