CRN Interview: Doug Frederick, EDS

Doug Frederick, who joined outsourcing heavyweight EDS in July 1999 as executive vice president, is also the president of EDS' Operations Solutions line of business, which focuses on the integration of IT outsourcing services with business process outsourcing. Frederick recently sat down with Section Editor Marie Lingblom to discuss the Plano, Texas-based company's strategies for the coming year.

CRN: There has been some discussion about whether EDS' top-line growth strategy in going after smaller, more focused deals means it would be competing with solution providers in the SMB market.

FREDERICK: We're just not in the [SMB market]. It's just not a place we are going to be efficiently effective to be able to go after, if you think about it. %85 For the most part, we have a fairly specific sales force going after fairly large clients and working to open up and mine opportunities that are much larger than where [most solution providers in the SMB market focus].

CRN: EDS is still in the megadeal business, though, correct? How does EDS define a megadeal, and where is the focus moving forward?

FREDERICK: The terminology we use for megadeals is about $250 million, but generally speaking, the ones that really garner a lot of attention are the ones that are $500 million, upward of $1 billion. The sweet spot for EDS is probably $50 million to $150 million. When we say a megadeal at $250 million, it means the total contract value. So it's the number of years times the number of dollars. Maybe to get to $250 million, it's $50 million a year for five years. What you'll find is most of the clients [with whom] we do those deals are probably $1 billion of IT spending. And we're trying to gain entry into the client by providing some service [that demonstrates] the service capability we have and the excellence behind it, and raise their standard of performance, and then sell to them additional services. So we might sign a $70 million or $100 million contract with a client that might only be $10 [million] or $15 million a year, but they could be spending $300 million to $400 million a year.

CRN: When presenting to industry analysts here [at the company's financial analyst meeting in Plano], EDS executives seem to be re-stressing the importance of strategic alliances. What kind of alliances is EDS focused on at the moment?

FREDERICK: After reorganizing EDS into lines of business in 1999, we started finding some real structure and substance in relationships with vendors such as Sun [Microsystems], Dell [Computer], EMC, SAP and other companies that help us bring the best value to the client. We put more substance to that about two years ago when we created an alliance organization, and that has been enhanced and increased in the past six to eight months.

Right now, the vision is to add alliances out in the regions where we are doing business. Is it new? No. Is it a continued refinement? Yes. Are we getting better at it? Absolutely.

CRN: What about partnering with other solution providers?

FREDERICK: We do that from time to time, on a case-by-case basis. The federal government is a great place where you cooperate and compete at the same time. Right now, IBM is a service provider to us and a product provider in work for the United Kingdom's Department for Work and Pensions. Now, we are not in the partnership business [with IBM], but we thought to win the business and to provide the client with a better value, we ought to be able to bring together the best resources in a specific area against a specific equation. So, it's really more of a joint bid and delivery, or a teaming agreement.

CRN: Speaking of IBM, there's been plenty of speculation that, given EDS' recent stock slide and financial challenges in the face of lowered IT spending and the bankruptcy of clients such as United Airlines and WorldCom, IBM may be looking to acquire EDS. Is EDS committed to remain an independent company?

FREDERICK: First of all, IBM had better bring a big wallet. But let's be clear: EDS is not for sale. We've signed $100 billion in business in the past three years and financed it by the way we do our work here. I don't think [EDS] needs help,certainly not from IBM.