August 18, 1997

EDS's Megadeal Outsourcer lands 10-year contract with major Australian bank By Bruce Caldwell DS has chalked up its second megadeal in a few weeks, following a 19-month drought of megadeals and a string of bad quarterly earnings reports. Commonwealth Bank of Australia selected EDS last week for a 10-year outsourcing contract worth about $3.8 billion. That tops the 10-year, $3.2 billion outsourcing deal EDS landed with BellSouth Telecom at the beginning of August. Commonwealth Bank will take a 35% stake in EDS Australia and transfer 1,500 IT employees as well as its computer assets to the EDS unit. About 40 staffers will remain with the bank to manage the outsourcing relationship, says James Evans, assistant general manager for the bank's technology, opera tions, and property unit. One of the largest banks in Australia with 1,500 branches and 6.5 million customers, Commonwealth Bank hopes to profit from its equity participation in EDS Australia as the national government outsources its IT operations. In 1995, EDS won a $565 million (Aus.) outsourcing contract with the government of South Australia. Aside from potential revenue opportunities, cost reductions are also a benefit of the deal, which follows a recent restructuring of the bank's IS organization and processing operations. The bank will capitalize on EDS's capabilities in E-commerce, and EDS will have responsibility for the bank's year 2000 compliance project, estimated to cost more than $100 million (Aus.). The deal apparently hasn't changed the opinion of Wall Street, which has been disappointed by EDS's earnings since it was spun off from General Motors Corp. last year, says Karl Keirstead, an equity analyst at New York investment bank Lehman Bros. "EDS had to give up a lot to get thi s big win." Back to News in Review Send Us Your Feedback Top of the Page

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