EDS: Cashing In On Outsourcing

car, buckled into his seat. The frantic parent, pacing outside, calls a customer service representative, who unlocks the door remotely. That car's futuristic computer system was not created by the car manufacturer or its customer service center. It's actually a General Motors dealer add-on option called OnStar that comes from EDS Corp., a Plano, Texas, systems integrator that derived 70 percent of its $16.9 billion in 1998 revenue from outsourcing.

Outsourcing used to be compartmentalized. The VAR ran a customer's copy or data center or an application such as billing. Now it's pervasive. Companies not only outsource internal operations, but they rely on VARs to create new products and services for them.

Not that long ago, EDS' outsourcing projects focused on "improving the generation and handling of information," says Hartnet Burger, EDS' executive vice president. "Today, clients expect wealth and value to be generated from that."

EDS' first outsourcing work for Troy, Mich.-based GM and BellSouth of Atlanta involved running data centers and specific accounting applications. Today, says Burger, outsourcing "doesn't stand alone." Outsourcing projects run across all of GM, for example, as EDS provides services and systems that help GM generate Web pages, accomplish online marketing, manage dealer relationships and provide customer service.

Also, EDS creates and runs network application solutions, such as managed groupware and e-commerce, that are sold to BellSouth's customers. In February 1998, BellSouth and EDS formed the Managed Network Solutions Alliance to meet the computing and IT needs of midsize businesses.

Outsourcing enables businesses to sell new products cost-effectively. It offers the dual opportunity for VARs to create products or solutions that provide ongoing revenue when the VAR outsources them.

EDS' GM OnStar project is an example of how advanced outsourcing technology has become. The OnStar system combines cellular telephone, Global Positioning System satellite technology and database applications. It notifies a customer service center when a subscriber's auto has a flat tire, runs out of gas, deploys an airbag or activates a theft alarm. EDS manages the system's infrastructure and trains GM dealers. OnStar centers have more than 120 EDS employees, who provide 24-hour service.

"These things are not historical outsourcing capabilities," says Burger. "They involve a complex set of services and a huge infrastructure to support them."

Not only has infrastructure and solution creation changed dramatically, the competitive landscape has also changed. "Five years ago, EDS was the only game in town," says Burger. "Today, there's a lot of competition."