AMS was founded in 1970 by five former Defense Department "Whiz Kids": Charles Rossotti, Ivan Selin, Frank Nicolai, Patrick W. Gross, and Jan Lodal.

The founders drew upon research in attribute-value systems and early relational databases developed by Pentagon colleague Hugh Everett III, who served as a non-administrative vice president and minority partner in the firm for a time.

During its first decade of operation, AMS focused its business on consulting and selling customized software to large government and corporate organizations.

In the late 1990s and early 2000s, American Management Systems was among the main telecom consulting companies in the United States.

As a result, AMS was a market leader to offer its telecom client Kenan's Arbor-B/P, the award-winning convergence Billing Solution.

Instead, it decided to commit to a huge (over 100M$) investment in the development of the sophisticated Customer Care and Billing System Tapestry for German fixed-wire telecom Arcor.

[5] A jury awarded the state $474.5 million in actual and punitive damages in August 2000, causing a drop in stock price from 44 3/8 to 14.

[citation needed] New CEO Alfred T. Mockett was hired by AMS in 2001 to grow the company's sales from $1.1 billion to $3 billion a year, with a goal of becoming a top tier system integrator through growth and acquisitions, with an eventual goal of a "big bang merger of equals."

For the first 20 or more years of its existence, the company was based in Arlington, Virginia on the banks of the Potomac River with a commanding view of Washington DC.