Terry Balluck, a spokesperson for Plano, Texas-based EDS confirmed to ComputerWire that the two companies are currently in discussions and evaluating a potential business relationship. But there is no announcement at this time. He was unable to confirm or deny whether this would include an acquisition of the business. A spokesperson for Towers Perrin also confirmed that the two companies are having preliminary discussions over a potential business relationship, but would not comment further.

However, a senior source close to one of EDS’s competitors told ComputerWire that the discussions are over the potential acquisition of 80% of Towers Perrin’s healthcare and welfare resources business, which have total revenue of $400 million. EDS is attempting to make its come-back and the Towers Perrin acquisition is thought to be announced any day now, the source said.

HR Services is one of three operating units within Towers Perrin, which provides services such as HR strategy and management, reward and performance management, learning, HR administration, retirement planning, and workforce and organization research. Towers Perrin also provides reinsurance and actuarial consulting services through its two other divisions.

If the speculation proves to be true, it will be the latest example of merger and acquisition activity in the rapidly consolidating HR BPO sector, and would follow the acquisition of industry pioneer Exult Inc by Hewitt Associates Inc in June 2004 when Lincolnshire, Illinois-based Hewitt paid $691 million for Exult.

EDS’s largest HR BPO deal is with Canadian bank CIBC, which it signed in June 2001, in a $156 million deal to supply an HR call center for and manager support, HR systems support, payroll, benefits, and pension administration. It handles 300,000 calls a year to the CIBC HR call center, and also manages the client’s occupational health services, expat services, relocation management, HR program and project management, and HR financial controls. Some 200 transactional employees on CIBC’s HR staff of 550 moved to EDS as part of the deal, which was extended in November 2003 by a further three years for $71 million.

In October 2003, EDS also signed a $45 million 10-year HR BPO contract with semiconductor provider Infineon, to provide payroll accounting, major parts of the recruiting function and student intern hosting in Germany and Austria to EDS’s operation in Russelsheim. EDS has since signed two HRO deals in 2004, a five-year $94 million deal with Arkansas Department of Human Services, and a 10-year $93 million deal with the US Department of Agriculture in June and July respectively.