VARBusiness 500 Profiles: The Cream of the Crop

Profile trio of the No. 1 company, fastest grower and list newcomer

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Perhaps the first hint that EDS (VARBusiness 500 No. 1) had good karma on its side came last February when the IT outsourcing giant won back the lion's share of the General Motors' contract it had owned exclusively for a decade, until GM put its $3 billion project out to bid in 2005. Then came Kraft Foods, which Plano, Texas-based EDS signed for $1.7 billion, its most lucrative contract to date in the retail consumer-goods industry. The win list continued from there: In 2006, Bank of America hired EDS for $700,000, and U.K.-based Vodafone entrusted EDS with a sizable chunk of its applications restructuring project, a deal EDS chairman and CEO Michael Jordan worked on personally and cites as a highlight of the year.

All told, EDS experienced its highest rate of contract signings--$26.5 billion--since 2001, including a 50 percent increase in its applications business alone. The outsourcing giant doubled net income for the year on sales that jumped 7 percent to $21.3 billion. It's all part of an ongoing corporate turnaround that, after several years, appears to be reaching its zenith. But no one...especially Jordan, is resting on his laurels.

"We're pleased with the progress we've made as a company, but we're always looking ahead and saying the road looks tougher," said Jordan in an interview last month with VARBusiness.

Tough road or not, EDS is a company on the move, well deserving of its spot atop the VARBusiness 500. Under Jordan, EDS has climbed itself out of the doldrums of the mid-2000s and begun reinventing itself in clear acknowledgement of today's global market and economic realities. Chief among the changes is embracing offshore development in India and other locations. On the downside, that's meant nearly 5,000 employee layoffs in the United States but has led to nearly as many hirings overseas and enabled the company to offer high-value IT services at lower cost.

EDS is also reorienting its traditional IT outsourcing business around more sophisticated, higher-margin apps such as SAP and Oracle, as well as infrastructure and business process engineering solutions. It's diving deeper into industry verticals, while undergoing an internal revamping of standards, metrics and procedures aimed at boosting customer satisfaction.

For the 45-year-old company that more or less pioneered IT outsourcing as a business model, such changes amounted to one long look in the mirror, Jordan said.

"One of the things we did was look critically at all of our businesses," Jordan says. "It was a matter of us deciding what it takes to get back on top of the game."

A 'Best Shore' Approach

Jordan attributes much of EDS' successful turnaround to his No. 2, Ron Rittenmeyer, whom he promoted to president and COO last year. Rittenmeyer, an EDS veteran, has spearheaded a number of strategic initiatives while cutting $1 billion in operational cost from the company ledger. His notables include leading the move to "best shore" delivery of goods and services. In EDS parlance, best-shoring involves a combination of outsourcing operations that take place stateside, near-shore and offshore, and are delivered to customers based on what's best logistically and from a cost perspective.

Last year, the company opened best-shore centers in Eastern Europe and Argentina to augment its existing operation in India. Through the purchase of MphasiS, which specializes in business process outsourcing and other high-end services, EDS added 20,000 employees to its India operations. All told, EDS is four times as big now as it was a year ago with its offshore businesses, Rittenmeyer says.

The transition, however, hasn't been easy.

"This was a cultural change that was significant and not without its struggles," Rittenmeyer told VARBusiness last month. "It's something that's becoming crucial to the company, now that we have 45,000 people in best-shore locations."

That workforce explosion has been tempered by the fact that EDS made layoffs here at home and created some challenges in learning to effectively manage such a diverse and decentralized staff, Jordan acknowledged. "Dealing with the employment fallout and changes is always hard for any organization," he said. "But we did it."

NEXT: How EDS plans to move up the applications stack.

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