On The Front Lines

Government solutions is now one of three new core operations called Global Sales and Client Solutions, which includes all of EDS' sector practices. The other two operations are Service Delivery and Portfolio Management. The plan, which Jordan alluded to in his first public meeting with analysts back in June, was formalized in late July when the company announced its second-quarter earnings, in which net income for the period plunged 56 percent.

The move to create the three interdependent operational units is designed to instill more responsiveness and accountability, while sharing best practices and giving employees a greater stake in the company's overall success, Jordan said during the analyst briefing in New York. Retired Air Force lieutenant general Al Edmonds, who was president of U.S. Government Solutions before the restructuring, is now vice president of Global Sales and Client Solutions-U.S. Government.

Edmonds, along with his predecessor Bill Dvoranchik, were both instrumental in helping EDS with the $6.9 billion Navy Marine Corps Intranet [NMCI] contract, arguably one of the largest and most complex outsourcing efforts to date. Riddled with delays due to the need to migrate thousands of legacy applications and systems along with program changes by the Navy, NMCI has since become a thorn in EDS' side from a financial point of view. Yet from an IT integration standpoint, NMCI ranks among the most visible IT transformation projects to date.

Noting the complexities of NMCI, Edmonds is confident that the deployment will get back on track, but had little to say how. In an interview with VARBusiness senior editor Jeffrey Schwartz, Edmonds insisted on looking ahead, not back. That means looking for new opportunities that include, among other things, helping the government secure its infrastructure. He's focusing on new opportunities, emerging technologies and giving partners a greater stake in the success of its solutions. Moreover, in keeping with his Air Force roots, Edmonds is a loyal soldier. He says he'd like to finish his career at EDS.

VB: What RFPs do you have your eye on?

Edmonds: I don't have my eye on a specific RFP right now per se. We just finished proposing an Air Force deal. The Air Force is trying to outsource its headquarters so that the uniformed people can go back into the field. But what we are expecting to happen here fairly soon is more and more of the large agencies are going to start to upgrade their infrastructures because they have been going for quite some time with old infrastructures and with the workforce aging in the government space. Over the next three years, a large number of the government IT employees will be eligible to retire. We think that will put a big crunch on the government in terms of being able to provide this capability for themselves.

VB: Is it clear that a lot of those functions will be outsourced, or will they continue to replace those workers?

Edmonds: I think [they] will be outsourced. It's a very difficult thing to replace IT workers today with the salary structure the government has routinely gotten. The government is trying to improve that, but the marketplace is just driving the young workers in the IT space into industry. When I was in the government, it was very difficult to retain my top talent.

VB: There's been a lot of buzz about the VISIT project [to provide IT security at all of the nation's entry points]. Are you bidding on that?

Edmonds: We are certainly involved in it, as you well know. We and some others were involved with the INS when it was a separate organization, so [we're quite suited for] things like VISIT and all the homeland security work. We're hoping that it gets shaped and formed into several RFPs. We are interested in the VISIT project, and we expect and hope that other DHS kinds of opportunities will come around over the next year.

VB: Is there any evidence that those DHS funds will start to flow out?

Edmonds: We've all been disappointed that hasn't gone faster, but with all the other events in the world, including the Iraq War, there's been a total effort by the government in terms of combating terrorism. Several billions of dollars were allocated by Congress over the last several months. We're thinking the government people who are doing this work are beginning to get traction in terms of determining their priorities. When 9/11 happened, initially everyone who made anything in the world came knocking on our door with that special perfect thing to solve the problems. It's taken us some time to sort through it. I've been in long discussions on this subject, and it has taken a lot of time to sort through what the different parts of the infrastructure need for protection and who has the legitimate products and services capabilities that will make us more secure. It has not been an easy task.

VB: What has come out of those discussions?

Edmonds: Well, one of the things that has come out of those discussions is that we need to protect more of our infrastructure than just the Internet. I think a lot of folks thought all we needed to protect was the Internet and the airports; we have a very interdependent infrastructure in this country that includes transportation, banking, communications, health care,a lot of infrastructure we all kind of take for granted in a free society that is interdependent. To protect [that is] very important. So one of the things we're trying to do as an industry, [and] also the government has been trying to do is to make sure that we're all aware of the other vulnerabilities we have in this country other than just the airports and the Internet, and do some things to make them more secure.

VB: Are you intrigued with some of the new technologies aimed at addressing these issues?

Edmonds: The technologies that always intrigued me even before these problems occurred were smart-card technology, positive-identification technology and predictive software that can alert you to things before they happen. I think those kinds of technologies are going to be a way of life in the future. I think we will see smart highways,with things like GPS, whereby you can put instruments on a vehicle and if [it goes] beyond a mile or two from the path [it was] destined, you can electronically turn the engine off.

VB: Are you seeing some of these commercially available smart cards and biometric devices being specified in more RFPs, or being used in more implementations?

Edmonds: Yes. As a matter of fact, we're providing more than 1 million smart cards to the Department of Defense right now, and other institutions are beginning to find that that's a good thing to do. I suspect that you're going to go into a lot of the government organizations and buildings, for that matter, and find some kind of positive smart-card or biometric technology; they will identify people for who they are because of the threat out there. I don't think anyone will continue to go along and pretend there isn't a risk out there.

VB: How does the outlook for state and local spending work, given the significant deficits that show no sign of abating?

Edmonds: The states are going through some tough times because of the economy. We are looking for opportunities to help them transform some of their current practices into cost-savings practices. The most difficult thing is they have established workforces and multiple established contractors. It's a tough time to take five or six contractors and combine them into one or two. But we're looking for win-win situations, whereby we can find some solutions that state and local government can use and also try to retain jobs. We are going to try to help them outsource their infrastructures, reduce their overheads and costs. A lot of room for improvement is around the amount of hardware they buy rather than buying services. What governments really ought to do is buy services rather than a lot of hardware and a lot of software that gets dated, frankly.

VB: Given the deficits and some of the legacy issues in many state and local governments, do you see furthering your footprint in state and local, keeping it the same or, perhaps, decreasing it a bit to emphasize more federal work?

Edmonds: I think there's a good growth market. The governors and the mayors are very IT-savvy. I think you'll find a lot of the states are finding the Medicaid kind of accounts they have that are very large also have other pieces to them that can help them a lot. We have a very good contract in Anaheim, where we are providing infrastructure for the city. We're trying to take that and grow it into a model for city government. There's a lot of first-responder activity that's related to homeland security. I think that's going to end up being sewn and grown into state and local government. I think it's a matter of time before we get traction in that space. So, I'm not giving up on state and local government.

VB: Are you concerned about the growing federal deficit and the effect it could suddenly have on IT spending?

Edmonds: I used to worry about it years ago when I was in the government, but I think we make a lot [about] the deficit when we have one, and too much about the surplus when we have one. As you know, we've gone from a very large surplus, and we were fighting about what to do with it, and now with the deficit. But government, by and large, as an institution that serves its citizens, will do what [it needs] to do to serve them. I think with the amount of activity and the speed at which the citizenry wants services, I don't think you can turn the clock back at all. I think the Internet has changed IT for the rest of our lifetimes. In my mind, technology is going to continue to expand as will the desire for information. I don't think you will ever see the IT thirst go away. It will change forms and flavors, but it won't go away.

VB: What's your strategy for getting the NMCI project back on track?

Edmonds: It's not a matter of getting it back on track. We continue to move the program forward. EDS has a strong relationship with the Navy. We're committed to providing the Navy with a superior secure network, and the Navy is also committed to the same thing.

VB: But what is your strategy for helping it become profitable in the coming years?

Edmonds: We will stay with the program as it's laid out. It's moving forward. We haven't veered from that approach. We haven't changed. [Declining to elaborate, he refers to remarks made by CFO Bob Swan during EDS' earnings call: "In the next 120 days, we'll undergo both a technical evaluation and an operations evaluation that will serve as a stress test for the functionality of the NMCI environment," Swan had said.]

VB: As you look at new RFPs down the pike, are you looking at new methods for determining how they can be more profitable in the earlier stages of those deals [to avoid situations like NMCI]?

Edmonds: On all the RFPs that are coming now, in the government space you're going to get RFPs that ask you for more services than before. In the past, they often had hardware and software and all kinds of facilities in them. We're seeing RFPs that talk more about service-level agreements. We are seeing RFPs that deal with time to respond to trouble calls, that address how much time it takes to repair a computer, and we're getting requests for things like management structure. They want to know how many layers there are between the boss and the guys that run their programs, whether the contractor will be on site or not. We're getting a different flavor of questions in RFPs, and they are talking a lot about best value rather than cost shoot-outs. They also talk about privacy, security and protection, and they even go so far as to ask what kind of tool suites you're going to use to make sure you know what's going on with the services that you provide in them.

And service excellence,how well can they get it to your company to find the right problem if you have a problem. I'm seeing that in RFPs more than anything else. Those things that come out dominate the RFP world in the government right now.

VB: Are you looking to broaden the partnerships you have with other service providers or suppliers of hardware and software?

Edmonds: The corporation has an alliance and partnership program we are focusing on. We recently announced plans to expand some of our alliance partners. I expect that to continue to happen, and that's going to happen from a corporate point of view, so we can take advantage of our size and the relationships we have among the key alliance partners. We will definitely take advantage of those alliances.

VB: How do you envision that playing out?

Edmonds: One of the things that differentiates EDS from a lot of companies is we're a real pure-play outsourcing company, which means we can basically take a lot of commercially off-the-shelf products from the major companies and integrate them into solutions. We have some offerings of our own in some of the major areas like supply chain, HR and ERP. But, by and large, we take the products or services from a lot of our partners and integrate them into an end-to-end solution for our customers. I think as those alliances get stronger and stronger, we'll be more competitive because we will have some solutions we can depend on that we can sell multiple times and not create things from scratch.

VB: How are you looking to strengthen them?

Edmonds: One way you strengthen those alliances is you bring them in with you at the beginning of a deal rather than after you shape the deal yourself. If I'm going to bid where I'm using one of my alliance partners, they are going to be part of the solution, they will be part of the engineering and part of the pain. That will strengthen the relationship very quickly, because you both have skin in the game. You are both going to work harder to make sure you deliver the services at hand, not the product at hand. Oftentimes, when you lead with alliances, you use hardware and you pay them the money. If you have problems with the hardware, you have to fight with them to come in and repair it. Once you start bringing [partners] in on the front end so they can participate in the engineering, architecture and inspection of the procurement, then you have them in the game to stay. The other thing we're going to do is strengthen our partnership with our small companies. The government likes you to team with small businesses and will tell you they want 25 percent to be that. We have a program called Mentor Protege, where we mentor our small companies. We teach them our methodology, our program-management approaches, our bidding approaches, and our delivery approaches. We bring that part of the team to the table. They are using EDS' processes, EDS' tools, EDS' methodologies, and that has strengthened those alliances tremendously.

VB: Are you looking to add new partners, narrow down the number you have, or are you happy with the current mix you have?

Edmonds: We're happy with the mix we have, but we add new partners all the time. With our Mentor Protege program, some of those are sponsored by the government, and when they graduate we add new ones to the program. When we have partners who have graduated, and they have done well with their performance, and the customer likes them, and we like them, then we bring them in as our partners. We don't mind growing the stable of companies we have alliances with that perform well if they give us a competitive edge.

VB: Are you looking to go after more of the smaller RFPs?

Edmonds: Whenever our core capabilities match, we don't care whether it's a mega deal, large, small or medium deal. If it's in our core space, we'll compete very actively. And we'll compete to win, not just to show up and occupy the space.

VB: What's the hardest part of the job?

Edmonds: If I were a wealthy man, I'd probably do this for free because I enjoy interacting with the people and sharing my experiences. I love what I do. I love the company I chose to come work for. It's been very much along the same cultural background I came from in the military,a lot of integrity, a lot of honesty and dignity. I would probably not trade this place for anything else.