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EDS preys on Defence as mega deals dry up

After three years of losing large chunks from multi-billion dollar IT outsourcing deals, EDS's managing director Chris Mitchell is placing his bets on Defence to bolster the company.
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Written by Liam Tung, Contributing Writer on

After three years of losing large chunks from multi-billion dollar IT outsourcing deals, EDS's managing director Chris Mitchell is placing his bets on Defence to bolster the company.

2005 was an awkward year for EDS Australia, according to Mitchell. The company held several lucrative IT infrastructure deals with Australia's biggest technology spenders — the Australian Tax Office, Customs, the Commonwealth Bank and the South Australian government — but all were soon set to expire.

"Back in 2005 we had all our main contracts up for renewal over the next 12 to 18 months. We weren't where we needed to be from a productivity standpoint and we had more fragility in our systems than we would have liked at the time," Mitchell said.

Despite the contracts ending, EDS retained 85 percent of its deals last year, said Mitchell, and signed AU$1.3 billion of new work, which has left the company's total revenue steady at just over AU$1 billion.

Although EDS re-signed deals with its major customers — the ATO, Customs and the Commonwealth Bank — all three have recently broken up their main outsourcing contracts into smaller deals, preferring to use multiple suppliers rather than a single master contractor, like EDS.

"We were able to re-sign a substantial part of our Commonwealth Bank contract and extended and re-signed a South Australian government contract for mainframe and distributed computing. We have re-signed the final extension to the Tax contract and of course that's going through the procurement cycle now for the ending of that in the middle of 2010," said Mitchell.

The two-year extension with the ATO however also coincides with EDS's exclusion from one major upcoming contract for the agency. Earlier this year, the ATO revealed it would not shortlist EDS as a potential supplier for its AU$385 million managed network services deal — the first of three infrastructure contracts worth around AU$1 billion over the next five years.

Similarly, CommBank has re-signed an AU$372 million IT services deal with EDS until 2012, however EDS has been replaced as sole supplier by a panel of vendors for the bank's application development work, which is worth around AU$1 billion over the next five years.

EDS now has its sights on the Department of Defence, according to Mitchell.

Allan Bennet, head of EDS's government and defence industry group, said EDS has won "small strategic consultancies" with Defence and that it will focus on logistics and back-office processing work with the department.

But whether those ambitions fit within recently-appointed Defence CIO Greg Farr's immediate plans for Defence remains to be seen. Procurement, datacentre consolidation and an overhaul of Defence's PeopleSoft-based HR system, PMKeyS, are Farr's first priorities, he recently told ZDNet.com.au.

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