EDS to move data centers to India

IT services company will close 21 data centers by the end of 2006--17 in the United States and four in Europe.

EDS plans to close data centers in United States and Europe, shifting some of the work to India to cut costs.

Twenty-one data centers will be closed by the end of 2006--17 in the United States and four in Europe, according to CFO Robert Swan--just under half of the 54 centers that the IT services company runs in those two regions.

The company, which announced the decision Tuesday, did not say how many jobs would be affected by the move.

Currently 27 percent of EDS' software application management workers are based in India; this change will increase that number by a third.

The decision to offshore the data centers is part of a cost-cutting plan that will eliminate up to 20,000 jobs within EDS's 120,000-employee work force.

Analysts, however, point out that time is of the essence in making the effort succeed.

"The suggested 20 percent reduction in costs over the next period--helped by the movement of application management staff to offshore locations--will enable an increased investment in branding and marketing (already under way)," Ovum Holway analyst Georgina O'Toole said in a research note. "However, this investment will need to bear fruit quickly if EDS is to achieve the turnaround that it is so optimistically suggesting."

Sylvia Carr of Silicon.com reported from London.