EDS Aims to Keep Riding Shotgun For GM

Global IT capabilities are part of EDS's pitch to continue relationship with automaker
With billions of dollars in revenue up for grabs, EDS is proposing a number of IT projects to General Motors Corp. in hopes of keeping lucrative ties to the automaker after its 10-year services agreement expires next year.

Among other things, EDS has pitched GM on its ability to move the automaker onto a common supply-chain tracking system that spans all of the countries in which GM does business. "GM needs to be a globally consistent enterprise," EDS VP Jeff Kelly told financial analysts in New York last week. Kelly manages EDS's GM account.

EDS's approach would use commercial and custom software to extract data from supply-chain activities at GM facilities worldwide. That data would then feed into Web-based interfaces through which GM executives could monitor supply-chain operations for areas such as vehicle production and fleet and retail sales.

Three weeks ago, EDS showed GM execs an electronic "global visualization" model it created of GM's entire IT network. The model, which Kelly demonstrated at the analysts' meeting, uses color codes to immediately identify a system outage and report the impact of that outage on specific business operations.


Automaker's partnership with EDS spans more than 20 years

Ross Perot launches EDS

EDS stock goes public for $16.50 a share

GM acquires EDS for $2.5 billion

GM spins off EDS as separate company and awards it a 10-year services agreement

June 2006
EDS's exclusive services agreement with GM is set to expire

The proposals are part of a larger effort by EDS to increase its annual sales to GM, Kelly said. EDS's sales to GM have steadily declined from about $3.8 billion in 1996 to $1.8 billion last year, according to filings with the Securities and Exchange Commission. EDS attributed those declines to GM's ongoing efforts to cut IT costs.

EDS's contract with GM expires in June 2006. The IT-services vendor supports 120,000 desktops for GM and runs 290 of its critical applications. EDS has managed to maintain an application availability measure of 99.98% for GM, Kelly said. It also delivers more than 2,100 performance metrics to the company every month, allowing the automaker to gauge EDS's service levels.

EDS faces tough competition in trying to increase revenue from GM. The automaker is formulating requests for proposals that would see it outsource even more of its IT operations, likely to several major computer-services firms. GM has estimated it could spend $15 billion on IT services over the next five years. In addition to EDS, Accenture, Hewlett-Packard, and IBM will likely bid on portions of the work.

"We have our eye on more than the $1.8 billion we currently enjoy," Kelly said. Frequent lobbying by top EDS executives is part of the strategy. "We've had a lot of great meetings with them over the past four or five months."

GM CIO Ralph Szygenda has asked Accenture, EDS, and IBM to develop common standards for about 30 IT-related processes in advance of awarding the new contracts. While that's an unusual request for a CIO to make of service providers prior to signing contracts, it's "an effort to drive down costs ahead of evaluating the new proposals," says Cindy Shaw, an analyst at Moors & Cabot Capital Markets.

GM executives weren't available for comment. Last year, Szygenda told InformationWeek that he hopes such standards would reduce the cost of designing and implementing IT services. It also could make it easier for GM to switch vendors.

Meanwhile, EDS is taking steps to cut its costs, which will help in the event that revenue from GM drops. The company will close 21 application-development centers in the United States and Europe over the next several quarters, company executives said last week. That includes closing 17 of 42 such U.S. centers. EDS also plans to reduce the worldwide head count in application-development centers from 32,000 to 30,000 this year. Overall, EDS says it wants to trim costs by $2 billion over the next two years after slashing $1 billion in costs last year.