EDS makes an outsourcing push

The company announced the acquisition of the HR outsourcing firm and the restructuring of its outsourcing division.
Written by ZDNET Editors, Contributor on
EDS is moving in the fast-expanding and higher-margin area of business process outsourcing (BPO), an area company chairman and CEO Mike Jordan had identified as a growth opportunity for EDS under his turn-around plan. In the last week the company announced the acquisition of the HR outsourcing practice of Towers Perrin and the organizational restructuring of the management of its BPO division.

EDS and Towers Perrin have agreed to create a yet to be named joint venture that will provide human resources outsourcing services. The deal will cost EDS $420 million and the company will own 85 percent of the new company, while Towers Perrin will own the remaining 15 percent. In a separate agreement, Towers Perrin awarded EDS a 10-year, $365 million information technology outsourcing contract.

The joint venture is projected to have annual global revenues of about $600 million, about half contributed by each company, and more than 400 clients in the United States, Canada, Europe, and Central and South America.

The company will be housed at EDS' headquarters in Plano, Texas. About 2,600 Towers Perrin employees will transfer either to EDS or to the new company.

Mark V. Mactas, Towers Perrin chairman and chief executive, confirmed his company also held talks with IBM but said it concluded a deal with EDS because EDS had the "right complement of skills and--there was a cultural compatibility" between the companies.

The transaction is pending approval by Towers Perrin shareholders, and is expected to close by the end of the first quarter of 2005.

Following the acquisition announcement, EDS said it has made several organizational changes aimed at accelerating the company's presence in the BPO market.

Joe Eazor, previously vice president of Corporate Strategy and Planning, has been named vice president and division manager of Business Process Outsourcing Services. Gil Marmol, who has led Business Process Outsourcing since 2003, moves to the role of division vice president of Planning and Operations Improvement.

Fariba Rawhani moves from leading EDS' customer relationship management unit to become vice president of Agile BPO. She will direct BPO portfolio development efforts.

"These moves are a logical next step in our drive for market leadership in transformational BPO," said Jordan. "We believe 2005 will be a pivotal year in business process outsourcing. Our new organizational structure will enable us to put the right resources against this vital growth initiative as we move to capture market share."

In the HR outsourcing market, which is growing at about 20 percent a year, the joint venture will compete against Hewitt Associates, Accenture, Affiliated Computer Services, IBM, Hewlett-Packard, and the Indian companies Wipro, Infosys and Tata Consulting Services.

Last year, BPO accounted for nearly a third of awarded outsourcing contracts valued at $1 billion and greater, according to consultants Technology Partners International Inc. It estimated large BPO deals hit $9.8 billion deals, compared with just $2 billion in 2003. New contracts for all types of outsourcing hit $72 billion last year, it said.

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