EDS chief: “We’re well-insulated” despite slowdown

The downturn economy has done nothing to stop the EDS steamroller, according to chairman and CEO Dick Brown.

Brown was in Toronto Thursday to deliver a speech for the Empire Club of Canada. Canada’s IT leaders were in attendance, including the CEOs of Microsoft Canada, Hewlett-Packard Canada and CIBC.

“The last number I saw was more than 600 companies have publicly announced earnings warnings,” said Brown of the slumping economy. “More than ever, CEOs I talk to are more focused on improving their bottom line. EDS can show companies a way to not only cut their costs and raise their productivity, but do it while enhancing their service in information technology.”

The company has posted 10 consecutive revenue growth quarters, noted Brown, thanks in large part to the increasing popularity of the outsourcing model. “We’re not immune to economic cycles at EDS, but we’re well-insulated,” he said. “In a way, outsourcing is an easier sell when times are tough.”

Last month, EDS Canada inked a five-year $70 million deal with Call-Net Enterprises to take care of its IT operations and infrastructure and a nine-and-a-half-year deal with the Bank of Canada, which will outsource some its key back office operations. On Thursday, EDS announced a five-year US$132 million agreement with the U.S. Army to improve its recruitment Web site.

Hardware and software makers are attempting to become outsourcers and service providers themselves, he said — evidence of the strength of the business. This year, for example, Internet software company Novell Inc. purchased Cambridge Technology Partners, a small services organization, to bolster its own provision of services and Hewlett Packard purchased parts of ailing service provider Comdisco.

” Competition is increasing in the IT services space dramatically. Why? Because competition goes to . . . where opportunity is the greatest. We don’t worry about the competition, we stay focused on customers,” said Brown. “Yes, companies are trying to replicate an EDS, but a company that wants to start a services organization . . . frankly couldn’t create an EDS in my lifetime.”

Brown reserved his comments on EDS’s market prowess for a press conference, choosing to address those in attendance at the Empire Club with the company’s role in the wake of the terrorist attacks of Sept. 11 in the United States.

The downtrodden market may have urged some companies to outsource parts of their business to EDS, but the physical threat of terrorist attacks is reason to store data remotely and build layers of redundancy into IT infrastructure to prevent the loss of data, said Brown.

American Express was still able to process 70 per cent of its customer transactions (an estimated 19,000 transfers worth US$14.3 billion) on the day of the attacks through its relationship with EDS. “You see, data has no nationality, data has no country of residence,” said Brown. “Because AmEx data was dispersed and protected in a remote EDS location, we were able to put them back in business immediately.”

The attacks were a lesson in the importance of decentralization, added Brown. “Companies can no longer pool their most critical people and technologies in a limited number of locations,” he said. “Decentralization on a global basis, using outsourcing if necessary, significantly reduces the likelihood of irreparable loss.”

One of the biggest casualties of the attacks, said Brown, is trust. He called for “a new collaboration” between public and private sectors and between nations, advising enhanced security tempered with a respect for individual privacy.

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