Canada’s largest steelmaker is EDS Canada‘s first major outsourcing win of 2002.
For an undisclosed sum, EDS will provide information technology support and development services to Hamilton, Ont.-based Stelco Inc. for the next 10 years.
The contract begins in April and will include implementation of new enterprise resource planning systems for Stelco’s order flow, maintenance, procurement, human resources and finance functions.
“We knew we needed to get these systems,” said Mark Steinman, executive vice-president and CFO at Stelco. “And we needed to find a creative way of doing it in light of not necessarily having the free cash flow to finance it on our own, so we came up with this combination of an outsourcing deal with a development contract in order to make that happen.”
In recent years, Stelco has maintained its IT internally, said Steinman. Under the newly minted contract, about 200 Stelco IT people will move over to EDS Canada.
The activities of the contract will be phased in, said Steinman. “We’ll start to see benefits hopefully within a year for some of these things,” he said. “We anticipate it will take upwards of three years to put everything in we want.”
Given the economic climate, Stelco’s emphasis of late has been on lowering its cost curve, said Steinman. “The only way you do that is through being more efficient and there’s a great opportunity here with these systems and what they can deliver.”
Although Stelco did not wish to disclose the value of the contract because of competitive reasons, “it’s not going to cost any more money than what we are spending today,” said Steinman.
Al Hurd, executive vice-president of sales at EDS Canada, said the number for people devoted to the contract will likely increase over time.
He said Stelco has about 200 legacy applications it perceives as being due for replacement and had already begun work internally before looking for an outsourcing partner to complete the work. “They had really geared up . . . but had decided they need the help of a major integrator to complete those initiatives.”
Working with steel companies is nothing new for EDS Canada, said Hurd, and while there hasn’t been a “freight train” of opportunities in the broader manufacturing sector, “we’re seeing a lot more interest in this sector in last 12 to 18 months. This is one of the first ones to go through.”