EDS looks to business transformation services for growth

Change at the company is being spearheaded by CEO Mike Jordan

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

The change is spearheaded by CEO Mike Jordan, who took that job last March and has since filled his upper management ranks with executives he hopes will take the company in a direction that will resonate with IT managers.

The 135,000-employee company sees future growth in helping companies leverage and integrate existing systems and transform their business processes, instead of simply operating systems for clients, or as company officials put it: "This mess for less."

By offering customers services to transform IT operations, EDS said it will also more directly challenge companies such as IBM and Hewlett-Packard Co. that have detailed similar approaches. EDS officials said the company's strengths will be an emphasis on open standards, depth of technical expertise and a relatively agnostic approach to technology.

EDS can offer businesses "anything IBM can do, but we're a little easier to work with and, we think, from a long-term [perspective], a better technical solution," said Jordan. The company's approach, which also involves changes to its vendor relationships, was outlined yesterday at an analysts meeting at EDS headquarters here.

The EDS team put together by Jordan includes Charlie Feld, a former CIO at Frito-Lay Inc. who became executive vice president of EDS portfolio management after EDS bought Feld's consulting group earlier this month; Steve Schuckenbrock, who also worked for the Feld Group and was a senior vice president of IT at PepsiCo Inc. and now is EDS executive vice president for global sales and client solutions; and David Clementz, a former CIO and president of ChevronTexaco Information Co. who is now an EDS executive vice president for service delivery.

In the belief that customers want to narrow the number of technologies they use, 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.

Microsoft Corp. was another company EDS officials said they want a deeper relationship with.

The approach also mirrors the belief of EDS officials that most businesses want to reduce the number of supported technologies and that most customers are agnostic about the underlying technology.

EDS will also work to build customer-centric models that are "made out of reusable parts," said Feld, something the company hasn't been doing. For instance, one customer may use PeopleSoft and another SAP, but the business intelligence layer and Web front can be similar for both ERP systems.

"They've taken a real important step in presenting a vision [of] how they are going to address customer needs. And they hadn't done this before," said Traci Gere, an analyst at market research company IDC in Framingham, Mass.

While other vendors are making similar service offerings, "the battle has just been joined," said Gere. "No one is delivering on this to any degree beyond a few exploratory customer relationships. Certainly EDS is a little bit late to the game, but the game is just beginning."

"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?'

"As the business is starting to recover, people are looking at making investments -- and EDS is no different," said McCarthy.

One EDS customer at the briefing, Joyce Phillips, executive vice president of human resources at Canadian Imperial Bank of Commerce (CBIC), a Toronto-based financial services firm with some 9 million customers, said she found the new direction reassuring. It offers "much more clarity as to where we fit as a BPO [business process outsourcer] in their strategic direction," said Phillips. "That's what I want to hear."

CBIC has outsourced its human resources to EDS.

EDS has previously announced plans to lay off 5,200 employees, or about 4% of its workforce. Officials yesterday said they plan to cut costs by 24% over the next several years, in part by pursuing a "best-shore" offshoring strategy. EDS is slated to announce its latest quarterly earnings next week.

In its third quarter, EDS last October posted a net loss of $600,000, 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. Company officials declined to discuss the contract.

Copyright © 2004 IDG Communications, Inc.

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