EDS Pins Hopes on Team of Ex-CIOs

PLANO, Texas -- After a rough year of layoffs, lawsuits and lackluster revenue, Electronic Data Systems Corp. officials claimed last week that the worst is behind them. Now they plan to grow the company by offering business transformation services led by a management team made up of ex-CIOs.

In adopting a strategy that goes beyond providing services for companies that want to outsource their IT operations, EDS aims to more directly challenge IBM and Hewlett-Packard Co., which are taking similar business-transformation approaches.

At an analyst meeting here last week, EDS officials said the company's strengths lie in its emphasis on open standards, depth of technical expertise and relatively agnostic approach to technology compared with IBM and HP.

An executive at Canadian Imperial Bank of Commerce in Toronto, which outsources its human resources operations to EDS, said she found the new direction reassuring.

It offers "much more clarity as to where we fit as a [business process outsourcer] in their strategic direction," said Joyce Phillips, executive vice president of human resources at CIBC. "That's what I want to hear."

Analysts said EDS needed to change to keep pace with competitors.

"I think they are trying to rationalize their broad range of offerings," said John McCarthy, an analyst at Stamford, Conn.-based Gartner Inc. "Everybody is coming out of this slowdown in IT trying to figure out, How do we reinvigorate ourselves? What's our value proposition?"

EDS CEO Mike Jordan, who assumed that position last year, said he's counting on a new management team to improve customer relationships. It counts the following among its members:

• Charlie Feld, former CIO at Frito-Lay Inc., who became executive vice president of EDS portfolio management after EDS bought Feld's consulting firm, The Feld Group, last month.
• Steve Schuckenbrock, who also worked at The Feld Group and was previously a senior vice president of IT at PepsiCo Inc. Schuckenbrock is now executive vice president for global sales and client solutions at EDS.
• David Clementz, former CIO and president of ChevronTexaco Information Technology Co., who is now executive vice president for service delivery at EDS.

Based on the belief that customers want to narrow the breadth of technologies in their IT operations, EDS said it intends to develop deeper relationships with a smaller number of technology vendors and have more of a "bias" toward certain products in its customer recommendations.

"By tightening alliances with the Suns and Dells ... we're trying to get a much better look ... into what's coming three or five years down the road," said Schuckenbrock. EDS officials also noted that they want a deeper relationship with Microsoft Corp.

In addition, EDS will work to deliver customer-centric systems that are "made out of reusable parts," an approach EDS hasn't taken in the past, said Feld. For instance, one customer may use an ERP system from PeopleSoft Inc., and another may be an SAP AG user. But both might be able to use the same business intelligence layer and Web front end.

EDS in October announced plans to cut 2,500 jobs, bringing last year's total layoffs to 5,200, or about 4% of its workforce of 135,000 . At that time, EDS posted a net loss of $600,000 for its third quarter, while revenue rose 6% to $5.24 billion.

The company is also facing a class-action shareholder lawsuit alleging that two former top executives knowingly misrepresented company earnings and the health of the multibillion-dollar Navy/Marine Corps Intranet contract . EDS officials declined to discuss the contract last week.