EDS lauds outsourcing benefits amid SA revamp

EDS has released a report claiming the company's massive whole-of-government outsourcing deal with the South Australian government generated an AU$1 billion "side benefit" to the state over the last nine years.The release of the report comes amid reports in yesterday's Australian Financial Review that the outsourcing specialist was likely to have reaped more than AU$700 million from the deal when it concludes in July next year after running since October 1995.

EDS has released a report claiming the company's massive whole-of-government outsourcing deal with the South Australian government generated an AU$1 billion "side benefit" to the state over the last nine years.

The release of the report comes amid reports in yesterday's Australian Financial Review that the outsourcing specialist was likely to have reaped more than AU$700 million from the deal when it concludes in July next year after running since October 1995. The deal was originally expected to reap EDS around AU$565 million.

The state government is understood to be planning to adopt a more strategic, cost-based approach to its outsourcing arrangements in the state once the deal expires, with the big-bang, whole-of-government approach ditched as a result.

The state's Minister for Administrative Services, Jay Wetherill, told industry figures at a briefing in late October last year, according to speech notes made available on the Internet that "this is not 1995.

"In future, we want the industry partners who support the delivery of our [information and communications technology] to clearly enable government to deliver on its key policy objectives".

The Minister told the AFR that the original contract's failure to encompass price had pushed the government onto the back foot in bargaining with the heavyweight supplier.

However, the just-released report, prepared for EDS by the South Australian Centre for Economic Studies (SACES)-- a joint research centre of Adelaide University and South Australia's Flinders University -- said the AU$1 billion figure "does not include the direct financial and employment impact from EDS' [information technology] outsourcing arrangement with the state government".

SACES said in its report it estimated the contribution of EDS' information technology operations to the state economy at AU$750 million since the deal was signed in 1995, with the employment generated being the equivalent of 8,000 full-time employee years.

The report added that the company's credit services operations -- EDS Credit Services -- added more than AU$250 million to the economy and boosted employment by almost 3,700 full-time employee years.

Pointedly, EDS executive general manager, strategy and economic development, Kym Teh, said the "additional work being undertaken by EDS in South Australia was unlikely to have been carried out by smaller, local firms.

"The vast majority of information technology services provided by EDS to corporate clients from its South Australian offices rely critically upon its international reputation and ability to effectively manage large projects.

"The credit services work undertaken at Lockleys (in South Australia) is performed for national and interstate finance companies and, in the absence of EDS' operations, the probability that this work would have been undertaken in South Australia is small.

"We have estimated this probability to be around 6.5 percent, based on South Australia's share of national output".

A spokesperson for EDS declined to comment on the Minister's remarks to the AFR beyond the statements contained in the report and associated press release.

The South Australian government has already released its first approach to the market under the post-contract arrangements, a request to provide new arrangements for the provision of desktop and mobile access devices, server equipment for the storage and processing of data, peripherals such as printers and photocopiers and network devices. A second approach, dealing with large-scale computing, is due for release next month.

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