EDS’ recent strategic investments could signal the end of a difficult period for the company.

Winning the right deals is fundamental to building the future, and EDS has recently had a number of successes that indicate it is far from down. For example, from its position of incumbent provider, EDS retained at least two-thirds of its existing revenues from the restructuring of the huge outsourcing portfolio of General Motors, despite troubled times at the automotive giant.

Additionally, in April the company announced the success of its bid (with partners Dell, Microsoft, Cisco, and EMC) for the global provision of IT services, over a seven-year period, to Kraft Foods. This deal is worth $1.7 billion in revenues to EDS.

After the earlier award to EDS of the contract with the UK’s Ministry of Defence, the first stage of the program has required investment funds, to the extent that the company states that its earnings per share were reduced by $0.36 by this commitment during 2005.

At the same time, EDS is developing an ‘Agile Enterprise’ platform to provide a network-based utility architecture as the basis for its own delivery of IT and business process outsourcing (BPO) services, and complemented by alliances with the same partners active with EDS in the Kraft deal, collectively known as the EDS Agility Alliance.

On the BPO front, EDS has piled in enthusiastically to raise its game to address enterprise human resources (HR) needs, creating a joint venture named ExcellerateHRO with the specialist company Towers Perrin that will combine payroll and related processes (EDS skills) with mainstream HR services such as recruitment and staff development. EDS spent $417 million on establishing this capability, which has further dented its long-term cash pile, and will want to ensure that it is fruitful.

Another significant investment remains in the wings for now. EDS has offered to buy the shares of Bangalore-based mPhasis but is still awaiting the result. It is important for EDS to make a strong success of this acquisition, in order to match the rapidly growing capability of competitors that can readily deploy low-cost skills when people are required.

Source: OpinionWire by Butler Group (www.butlergroup.com)