CIA startup technology firm gets cautious thumbs-up

The CIA's edgy experiment in acquiring cutting-edge technology is a qualified success, according to a review by independent business executives. But the CIA lacks a clear strategy for developing or investing in information technology and that could hobble the upstart company's effort to bring the intelligence agency up to date. The reviewers also found the CIA isn't doing a good enough job crafting marching orders for its investment corporation or getting the technologies it invests in adopted within the agency. Named in honor of James Bond's gadget and gizmo master, "Q," In-Q-Tel is an external, nonprofit corporation founded in 1999 and funded by the CIA. It functions much like the internal strategic venture capital organizations technology companies use to identify technologies or companies to buy. In-Q-Tel receives funds from the CIA to invest in a collection of unconventional technologies the agency hopes will help it sort and parse the blizzard of classified and open-source data threatening to bury it. The first In-Q-Tel technology adopted within the CIA was a presidential information dissemination system first used to brief George W. Bush during last winter's presidential transition. It provides advanced search capabilities and real-time intelligence to the presidential intelligence briefer via laptop computer. In the past, briefings were conducted from large binders filled with pages of information cut and pasted from a variety of sources. As of June 6, In-Q-Tel had received approximately $81 million from the CIA. Its charter lasts five years after which the CIA must decide whether to renew it. The fiscal 2000 Intelligence Authorization called for a review of In-Q-Tel. The CIA selected Business Executives for National Security (BENS), a non-partisan non-profit group of business leaders, to conduct the In-Q-Tel cost-benefit analysis, which was delivered to Congress and the CIA in June and released publicly Tuesday. Thirty BENS members performed the review, many of them executives with private sector venture capital firms and investment banks. Despite early skepticism about the CIA's attempt to compete in the venture capital industry, the BENS panel gave In-Q-Tel positive reviews, said C. Lawrence Meador, panel chairman and Boston technology entrepreneur. "To date, In-Q-Tel has reviewed 750 business plans, selected nearly two dozen for investment and brought three products to the pilot stage," the panel found. "By private sector standards this represents a noteworthy accomplishment and the start of a good track record." Much of the promise of In-Q-Tel lies in its ability to bring technology into government outside the normal procurement process by taking equity positions along with other investors in companies while they still are developing technologies. "In government contracting, a $1 investment [generally] produces $1 in value," said Deborah Lee James, executive vice president of BENS. "For In-Q-Tel, a $1 investment produces $2.15 in value because it is leveraging other people's investments. "One attractive aspect of In-Q-Tel is that it can co-invest and cause creation of a new technology," Meador added. While the BENS panel found In-Q-Tel is well positioned to deliver technology innovation to the CIA, the agency isn't yet able to quickly and efficiently put those innovations to work. Agency insiders only vaguely understand the company's purpose and capabilities. Some offices resent the fact that funds were taken from their budgets to cover In-Q-Tel costs when it was created. CIA analysts "learn more about In-Q-Tel by reading media reports than from internal 'marketing' on what In-Q-Tel technologies could do for them," the panel reported, recommending more aggressive internal advertising of the company's capabilities. The agency also must move more quickly to accept technology, the panel found. "New IT must go through six boards and 130 process steps to be accepted," Meador said. The panel expressed concern that the CIA never had consolidated and articulated its IT needs before providing In-Q-Tel a set of problems to address. Thus the panel advised the agency to "immediately assess how well its information technology strategy is aligned with its business strategy" and translate the assessment into "an IT strategic action plan to address In-Q-Tel and other IT acquisitions." The panel also criticized the lack of performance measures for In-Q-Tel. Two sets of measures have been tried since 1999, but neither kept pace with the organization's evolution, the panel found. Panelists suggested In-Q-Tel be measured against its ability to speed adoption of new technology within the CIA and its financial progress towards self-sustaining operations. Panelists also called on CIA leaders to take more responsibility for delivering In-Q-Tel technology to CIA users. In-Q-Tel obviously is pushing alarm buttons within Congress and the CIA. The BENS report marks the fourth review of the corporation in just two years of existence. "That seems a bit excessive," Meador said. "The panel would say that in terms of [In-Q-Tel's] investment portfolio, it will be two or three years before you can make an assessment," he added.