War Profiteer of the Month: Unisys Corp

By Eric Töpfer

Once the forth largest Pentagon contractor, the Unisys Corporation has become one of the leading global suppliers of “Homeland Security” technology. Its business operations and politics are a telling example for the power of the security-industrial complex.

Studying the large technical projects of European cooperation in justice and home affairs can be astonishing. Whether it is the programming of the Prüm-CODIS-interface for the comparison of national DNA databases and their wire across the Atlantic, the upgrade of the Schengen Information System to SIS II and its “synergies” with the Visa Information System, the development of the Europol Information System, the networking of national vehicle registers in the context of the EUCARIS initiative, the standardisation of data exchange between national criminal records or a pre-study for the Critical Infrastructure Warning Network of the European Union – one name is always popping up: Unisys.

"Our products and services touch almost every defense and civilian agency. […] We manage data centers, modernize critical applications, and support the end users of some of the largest public and private entities on earth, while keeping everything safe and secure,” the company residing in Blue Bell, Pennsylvania is boasting on its website. And indeed, worldwide more than 1.500 administrative bodies, 22 of the 25 largest banks, eight of the 10 largest insurance companies and more than 200 airlines are relying on services and products of Unisys. With offices in 63 countries on all five continents and 26,000 employees who serve clients in more than 100 countries Unisys is a real multinational. With an annual revenue of $5.23 billion (2008) the corporation is not one of the top “global players” but Unisys is not selling cars or natural resources but makes its profit with IT services and mainframe computers.

From rifle manufacturer to global IT corporation

The history of the company can be traced back to the firm E. Remington & Sons manufacturing rifles since 1816 and later also typewriters and other office equipment. As Remington Rand the company introduced the legendary mainframe computer UNIVAC. In 1955 Remington was swallowed by the arms company Sperry which grew big through the production of navigation systems and semi-automated weapon systems for the U.S. Navy and U.S. Air Force. The company was renamed Sperry Rand Corporation and developed quickly into one of the key competitors of IBM – in particular by purchasing mainframe computers to the US military, the National Security Agency (NSA), the Atomic Energy Commission but also to the U.S. Census Bureau, the Internal Revenue Service, large industrial employers, financial institutions and for booking systems of international airlines. Already in 1978 the top management of Sperry decided to concentrate on the computer business, and in 1986 the company was taken over by the Burroughs Corporation, a competitor producing calculating machines and computers. Result of this hostile takeover which was arranged by Bourroughs CEO W. Michael Blumenthal, former U.S. Secretary of Treasury, was eventually the creation of “United Information Systems”, the Unisys Corporation which was at that time – following IBM – the second largest IT company of the world and the fourth largest arms company in the United States.

But the promising start soon ended in crisis. Four years after the merger Blumenthal quit and left the corporation. Suffering from the end of Cold War and cuts in the Pentagon budget as well as from the overslept looming triumph of the personal computer the company suffered losses summing up to $2.5 billion between 1989 and 1991. In addition, the image of the company was heavily damaged: In the context of “Operation Ill Wind” the F.B.I. and the Naval Investigative Service had uncovered Unisys’ involvement in the largest corruption scandal in the history of the Pentagon. In the “Iron Triangle”, a network of Pentagon officials, security consultants and arms companies providing retired top military figures with jobs in consulting companies (“rent-a-general firms”), overbilled contracts worth billions of US-Dollars were awarded. In September 1991 Unisys was declared guilty not only of having bribed high-ranking Navy and Air Force officials for contracting the development of the Aegis anti-missile-system and other projects, but also of illegal campaign contributions to members of the House Armed Services and Appropriation Committee. The company had to pay a record $190 million fine. The verdict sealed the sell-out of Unisys’ arms branch which had already begun in the late 1980s.

Blumenthal’s successor, James Unruh, ordered a radical cut of jobs and a strategic reorientation. Until 1997 the number of employees was reduced from 47,000 to 33,000, and the launch of an IT service unit indicated a new emphasis. Facing the economic crisis in the United States, Unisys aggressively expanded in overseas markets in Europe and Asia from the early 1990s onwards and marketed high-end servers as compensation for its failure in the booming PC business. In doing so, the company is not simply selling hardware but “brings together” – in its own ad words – “services and technologies into solutions”. This means that Unisys develops, implements and manages IT-systems, data centers and networks of administrations and enterprises around the globe. It offers consulting services for the maintenance and security of IT and delivers hardware with its servers of the ClearPath and ES series but also develops software and middleware tailored for its clients. To summarize: Unisys offers all what you need for the operation and utilization of large databases. Though the sales of hardware have reduced significantly – between the mid-1990s and 2009 its share in revenue decreased from 41 to 12 per cent – mainframe computer remain of strategic importance for the company. On the one hand net profit from hardware sales is with up to 50 per cent twice as much as in the service segment. On the other hand one third of Unisys’ revenue comes from outsourcing services, which means that clients store and process their data “in the cloud” of Unisys data centers. In fact, Unisys “solutions” are in search of problems which have to be processed at large scale.

Bursted dreams and fresh air in the morning of 9/11

Despite the radical change which Unisys’ executives ordered during the 1990s real success did not materialize. Though Unisys’ stock price rose to almost $500 between 1995 and 1999, revenue stagnated and the balance of the decade made up a loss of $672 million. Accordingly tough was the landing when the “New Economy” bubble bursted at the dawn of the new millennium. Until late summer 2001 the stock price crashed down to $80 per share, and revenue sunk by $900 million compared with 2000, and after three successful years the company ran again into deficit.

Thus, 11 September 2001 and the response of the Bush government came in the nick of time for the groggy company. Unisys reacted promptly. In 2002 it added 300 “security experts” to its management and launched a handful of “Security Centers of Excellence” around the globe. In addition, a “Security Advisory Board” was installed in July 2003. Later it was “Security Leadership Institute”, “a forum of nationally recognized security experts from business and government that provide insights into emerging security issues and best practices to organizations worldwide”. Among its founding members were former leading figures from NSA, F.B.I., U.S. Air Force, Royal Canadian Mounted Police and Interpol. Obviously the “rent-a-general-strategy” of the 1980s was not forgotten despite its painful consequences. The fact that Tom Ridge, an old friend, became secretary of the newly created Department of Homeland Security (DHS) probably fitted the needs of Unisys’ top management. During his time as Governor of Pennsylvania both parties were successfully collaborating in developing the e-government portal of the state – a home game.

The efforts proved rewarding: Unisys Corporation became the third largest contractor of the – “open for business“ Department of Homeland Security. From 2003 till 2010 the company received $2.41 billion from the DHS, among others for major contracts to develop the IT systems for the newly created Transportation Security Agency (TSA) and the DHS itself, for the “Operation Safe Commerce” for container security in US seaports, the “United States Visitor and Immigrant Status Indicator Technology” (US-VISIT), the programme “Registered Travellers”, the project “Free and Secure Trade” (FAST), the “Western Hemisphere Travel Initiative” and the “Automated Targeting System”. In partnership with other high-tech giants such as IBM, Boeing, Cisco, SAIC, AT & T these projects are not only about the installation of wide-area computer networks and massive databases but also and in particular about smart cards, biometrics and RFID technology for the identification, risk assessment and tracking of persons and goods.

Unisys seemed to be predestined for all these tasks indeed. In the area of RFID the company is central partner of the U.S. Army since 1994. Using this technology at 1,700 sites in 31 countries worldwide the army is operating one of the largest RFID-based logistics networks on earth. But Unisys was not only exploiting its long-standing experiences in arming and computerising the US military. In fact, it could also refer to many international references in the area of internal security. In 1988 it sold computers worth 8.7 million US-Dollars for the operation of a “peoples database” to Iraq’s Home Ministry. In the 1990s Unisys pioneered the introduction of biometric smart cards and modernised population registers in Costa Rica, Malaysia and South Africa. However, every once a while it seems that in US Homeland Security business the supply dictated the demand. Three quarters of the overall volume of all DHS contracts were won by Unisys without competing with any competitor. Obviously these contracted projects were exactly tailored for Unisys.

To create the right atmosphere for its “solutions” the company is publishing its Unisys Security IndexTM twice a year since 2006. The index, allegedly based on the “robust” basis of polling 8,500 persons in nine countries, is usually reporting an increase in fear of identity theft or rising acceptance of biometrics. But more important for the marketing seem personal networks. The company is, for instance, presenting Patricia Titus as “thought leader” for security on its website. Titus, former Chief Information Security Officer at TSA, Unisys’ largest client among the DHS authorities, and still busy in several technical advisory boards of the US government is today in charge of information security at the coorporation’s unit “Federal Systems”. As such she is contact point for the US administration, “capitalizing on her extensive operational and leadership experience“. Another example is Terry Hartmann, responsible for Unisys’ Homeland Security strategy emphasising biometrics and identity management. Before joining Unisys he was IT manager at Australian Passport Office and is acting as “expert” for the International Standards Organisation (ISO) and the International Civil Aviation Organisation (ICAO), thus, being one of the string-pullers of global standardisation of biometric passport.

Brussels, biometrics, border control

16 per cent of Unisys’ total revenue is coming from contracts with the US federal government, which is the largest client of the corporation. However, even after 2001 the top management is still keen to expand in internal security business in other industrial nations. In particular in times of economic crisis the public sector counts as rather solid market segment. In Australia, home of Terry Hartmann, Unisys was contracted in 2006 to work for the “Biometrics for Border Control Program” of the Department of Immigration and Citizenship. In Canada the company could secure contracts for biometric identification systems of workers at airports and seaports.

Also in Europe Unisys is busy in promoting its “solutions“. While governments in the nation states were holding their protective hand over homegrown IT-industry in the past, the EU-bureaucracy is obviously more open to Unisys’ offers. Though in the voluntary EU lobby register the corporation is hiding behind the American Electronics Association in Europe till today, its Belgian branch is well networked. Located only three minutes walking distance away from the central mail centre of the European Commission’s procurement agency OIB, the Brussels office of Unisys organised, for example, for the Directorate General (DG) Enterprise and Industry workshops on e-procurement, e-borders and e-passports; it was invited by DG Justice, Freedom and Security to the first “EU Forum on the Prevention of Organised Crime”; in cooperation with DG Internal Market it developed perspectives for strengthening the European arms industry, and it is supporting all Commission services in developing, managing and maintaining their IT systems on behalf of DG Informatics.

Central contact person of Unisys in Brussels is Director Patrice-Emmanuel Schmitz, a lawyer and IT architect, who was also in charge of the launch of the European Biometric Portal in 2005. On behalf of the European Commission this website aimed – together with Trend Report also written by Schmitz – to serve the European biometric industry as knowledge platform for the development of the market. Strategic partner of the project was the European Biometric Forum, the European biometrics industry lobby, with Unisys being one of its 150 member organisations. In April 2006 Unisys eventually inaugurated the “European Biometrics Centre of Excellence” in Brussels, a technology showroom aiming to promote the benefits of “modern identity management solutions” to target groups from private business and public administration. Meanwhile Schmitz is being supported by Roberto Tavano, an Italian consultant, who is travelling as Unisys’ “Vice President European Security Programmes” around the world to give key notes at security congresses and trade fairs. “In this role,“ Tavano writes "I'm shaping the business concepts underpinning our go-to-market models in Border Control, Identity Management & Credentialing and Physical Security spaces. Innovative Registered Traveller scheme formats and Expedited Airline Passenger Clearance processes fall within the solutions portfolio that was developed for world-wide roll-out.”

It becomes clear that this is more than simply marketing technology and IT services when Tavano appeals for the outsourcing of collecting and storing biometric identifiers for large-scale systems such as the Visa Information System, or when Schmitz and his team give the European Commission a prompt on executive powers for border control teams. Unisys with its profit-oriented visions of security aims to install new, semi-private regimes of border management and other forms of control far beyond democratic oversight.

First published in "Statewatch Bulletin"