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Acting as a knife for government budgets But outsourcing services yet to attract N.J.’s interest

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While New Jersey cuts the state budget to the bone, a Parsippany-based company is growing because of the money its outsourcing services save other states.

John C. Parry Jr. says Solix can administer
subsidy programs for a fraction of what
governments spend doing so.
California, Texas, Connecticut and Pennsylvania governments are Solix Inc. clients, but the Garden State doesn’t currently outsource to the company, though CEO John C. Parry Jr. said he’s had some discussions with state officials.
States generally budget 10 percent of a subsidy program for administration, he said, but Solix does it cheaper: less than 2 percent on its federal contract, and less than 5 percent in smaller contracts. “The profit motive leads us to innovation, figuring out how to do it better and quicker with less people,” he said.
About half of Solix’s revenue comes from contracts with the federal government; state government work is another 20 percent, with the rest coming from the private sector. Its 1,100 U.S. employees nationwide — including a growing, 450-employee presence in New Jersey — are on track to reach annual revenue of $150 million for the company in a few years, Parry said. This growth will come from acquisitions and from the continuing trend toward outsourcing by cash-strapped governments.

Regarding New Jersey’s use of Solix, Andrew Pratt, spokesman for the state Treasurer’s office, said, “When the state of New Jersey sees an opportunity to save taxpayer money or to perform better service, it will do so, whether it be with outsourcing or with increased use of government employees.”

Meanwhile, Solix also is landing private-sector clients that want its expertise: determining eligibility for rule-laden programs, then dispensing and monitoring large sums of money.
Solix can work for any client “that needs help determining eligibility for goods and services,” Parry said. “If there is a program that requires that somebody be eligible for something, we can handle it.”

By far the biggest Solix customer is the federal government, which dispenses billions of dollars each year to schools, libraries and rural health care programs to subsidize their telephone and Internet bills. The subsidy money comes from the “universal service” charge on Americans’ monthly phone bills. The government dispenses about $2.25 billion a year in telecom subsidies, but gets applications for about twice that amount; Solix has the task of divvying up the money fairly as it reviews applications for the federal subsidies, which are awarded based on need.

“It’s not as easy as it might seem: there are schools springing up all over the place that are eligible for subsidies, and there is a myriad of rules and regulations. We are the ones that have to make it work,” Parry said.
Solix also administers telecom subsidy programs for eight states, and does eligibility analysis for energy subsidy programs. It recently acquired a company that administers scientific research grants, and landed a contract with a cell phone company to determine eligibility for free or subsidized cell phones. Each year, Solix employees make about $4 billion in eligibility decisions that impact thousands of individuals and organizations nationwide.

Parry sees opportunity in the health sector, as the nation’s drive to lower spending spurs the creation of new programs.
“If a fund is set up in a state to provide a health care subsidy, and people have to meet certain eligibility requirements — that is something we can do,” he said.
Telecommunications analyst Robert Rosenberg, president of Insight Research, in Boonton, said of Solix: “if we are going to continue to be a rules-based society, this kind of organization will continue to have utility.”
In 2009, Solix outgrew its former headquarters in the Whippany section of Hanover, and moved to the Lanidex commercial office complex; it has already filled up one building, and will soon take additional space. In five years, Parry estimates Solix will have 2,000 employees nationwide.

Founded in 1987 as a division of the National Exchange Carrier Association, the owners of Solix are the nation’s 186 telephone companies. Solix is a private company that doesn’t disclose its profits; Parry said Solix has a return on equity in the 25 percent range. He said Solix has no plans to go public, but is considering raising $10 million to $20 million to fund acquisitions: “There are bargains out there. We don’t have any debt, and we have a lot of cash.”

Most Solix employees have college degrees. “We have people with degrees in music, in everything you can imagine. Very few of our people have accounting or finance degrees,” Parry said. “They have to be able to communicate well, because they talk to school districts, and health care facilities and telephone companies. The work is all analytical.”

E-mail to:  bfitzgerald@njbiz.com

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