Phil Friedman’s CGS, INC. takes on the World

Phil Friedman always had a good head for business. That much was evident in his home country, the former Soviet Union, where, by age 20, he was put in charge of 400 people at a factory that built electronic equipment for submarines and military airplanes.

“This was quite unusual in the former Soviet Union, more so because I was Jewish,” he recalls. “While working there, I observed the head of the firm, how he interacted with people and his leadership skills, and I clearly remember saying to myself, ‘I can do what he does. And one day I will run a company with 5,000 employees.’ I’m not there yet, but I’m working toward it.”

And so he is. Friedman’s company, CGS, Inc. (for Computer Generated Solutions), began in New York City in 1983 with 5 employees, and now employs close to 3,000 worldwide.

Upon immigrating to the US in 1976, Friedman, who has degrees in electrical engineering, economics, and finance, took intensive courses in English and in the then-new field of data processing. In 1980, he got a job as manager of data processing at the garment manufacturer Charles Greenberg & Sons. After successfully installing one of the New York fashion industry’s first data-management systems for Greenberg, he started his own company, with his former employer as his first client. Major accounts like Calvin Klein and Members Only soon followed.

While the apparel industry remains a core part of the CGS business, the company has ranged far afield, both geographically and throughout industries, in its quest to be a leader in providing customized information technology solutions.

CGS operates in 35 countries in North America, Europe, and Asia; has alliances with Microsoft, IBM, Blackberry, Dell, Hewlett Packard, and many more; and works in industries including entertainment, media, technology, financial services, manufacturing, and even government.

And there’s no slowing down in sight: “We will be expanding,” says Friedman firmly, “both organically and by acquisition.” (Friedman has just one fellow stockholder, the government of Singapore, which bought 20 percent of the firm in 1999.)

NY Report publisher and editor-in-chief Robert Levin interviewed Friedman in his spacious corner office in the World Financial Center, chosen by Friedman for its sweeping view of Ellis Island and the Statue of Liberty. Friedman shared his remarkable success story and his strategies for remaining a hands-on boss even as the company continues to grow.

Robert Levin: When you were first starting out, what made you think there was a need for a company like CGS? Or, said another way, what was the opportunity that you saw?

Phil Friedman: At that time—we’re talking 26 years ago—I believed there was an opportunity for a company that would service the mid-market companies in New York. The large multinational companies like IBM and EDS focused, at the time, on the Fortune 5000 clientele, so the mid-market was underserved.

I wanted to provide a place where a customer could come to a vendor and buy hardware, software, and services, and support it all under one contract. At the time, we called it a “composite solution.”

So that was initially the concept. I also wanted to create a diversified company where I wouldn’t be limited only to one service, or one product, but be able to provide many different services under one umbrella. And that concept worked for us, because today we are a very diversified technology company.

A Vision Evolves

RL: Did any part of your original vision change over the years?

PF: Sure. Your vision has to constantly be adjusted. While you have an overall target, you adjust it as you go along, because you also have to serve short-term goals.

But every time you achieve the short-term goal—and this is how I operate—you set a higher goal. And you redesign the vision. It is only a reflection of the period of time in which you’re operating. The vision that I had in 1983 is very different from the one I have today.

RL: What have been the major turning points for the company so far?

PF: There have been many, but the first major breakthrough was in 1993. After 10 years marketing someone else’s product, I bought a company that manufactured product. And that was a completely different ballgame, because I entered into the software business, where the company had been only a services company.

RL: What was involved in that decision?

PF: It was a very simple thing. We serviced the software from a company in California called ACS. One day I went to meet with the chairman of the company, and I was complaining that they’re not making enough investment in the product, in R&D. And he looked at me and said, “Phil, if you know what to do, why don’t you buy the company?” And two weeks later, I gave him an offer and I bought the company. There have been many other turning points—we entered new lines of business, we entered the outsourcing space, things that were totally new to us.

RL: When you decide to do something new, whether it’s to enter a new line of business or make a major acquisition, what goes into making that decision?

PF: I typically look at a couple of things; one of which is ROI. I need to return my investment in four to five years. I look at the management of the company—if it’s not good I will not buy it, no matter how successful the business is. If the management is not willing to stay for the transition, I will not buy the company.