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Electronic Data Systems (EDS) |
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WIKI ANALYSIS| This company has recently been acquired or received a credible acquisition offer. |
Electronic Data Systems Corporation (EDS) is a global technological services company that was acquired by Hewlett-Packard (HPQ). Forty years ago, Ross Perot founded EDS and, in doing so, created the information technology outsourcing industry. Today, EDS offers a range of IT and business process outsourcing services to clients in fields as diverse as Healthcare , financial services, manufacturing, and government. For example, EDS helps businesses process credit card transactions, manages 65,000 servers around the world, and provides technical support for 3 million desktop computers. EDS also runs both the technology and staffing for Human Resources departments for 400 organizations in the western hemisphere, including payroll services and employee relations. Headquartered in Plano, TX, the company has approximately 131,000 employees located in the U.S. and around the world.
Business Overview
Electronic Data Systems is in the process of developing and improving a new technology platform called the EDS Agile Enterprise platform. This network-based platform is intended to increase EDS' flexibility and reduce costs by providing a new way for clients to structure their IT systems. The key feature of this platform is its adaptability to the changing technological environment: while it does not create any new services on its own, the Agile Enterprise platform is designed to accept and integrate additions and new services with the existing services, instead of merely mashing old and new together as many other infrastructures do. A related initiative is the formation of the EDS Agility Alliance, a cooperative group of technology companies including EDS, Cisco Systems, Dell, and Microsoft. The companies in the Agility Alliance have teamed together to promote the Agile Enterprise platform, and the platform supports the services of all Alliance companies, in order for them to best tailor their offerings to client needs.
Trends and Forces
Increasing Outsourcing of Technology Jobs
The net outflow of information technology jobs from the United States and into areas with developing economies has been occurring for several years. Firms are outsourcing more and more of their technology-related needs to offshore offices, many of which are owned and operated by third party firms such as EDS. Electronic Data Systems is taking advantage of this trend by opening many of its new offices in offshore locations, which allows EDS to enjoy the benefits of lower labor costs. EDS has been expanding most rapidly in India, but has also opened branches in China, Latin America, Hungary, and Poland.
Rapid Growth of Technology
The extreme speed at which technological advances are made has serious repercussions for Electronic Data Systems. The infrastructure business, currently the largest division of EDS, faces sizeable depreciation charges every year, as the existing technology becomes outdated and slower, less efficient, or less accurate than newer technology. EDS constantly spends large amounts of capital on research and development of new technologies, and on implementing the new networks and service platforms that are developed.
EDS is somewhat cushioned, however, from the rapid pace of technological development by its business process outsourcing (BPO) services. BPO is much less dependent on technology than the infrastructure division, and requires less capital investment to maintain competitiveness. As EDS continues to expand its BPO division, the firm will become less depending on the capital-intensive IT division and can realize higher margins and greater market stability.
The speed of technology turnover is overall good for EDS, as it creates barriers to entry for potential competitors. EDS has the experience and existing research procedures to keep on top of new developments that newer companies may lack. Furthermore, the growing uses of technology, by both consumers and businesses, contributes to continued demand for EDS's services.
Economies of Scale Help Cut Costs and Improve Service
EDS has been active in soliciting other technology companies to cooperate as part of the EDS Agility Alliance. The Alliance was active in jointly developing EDS's Agile Enterprise Platform, which will be integrated with the Alliance members' products and services as well as EDS's own. This allows all the Alliance members to split research and implementation costs, as well as offer a larger number of clients a wider range of functionality on the same service platform than any one firm could do alone.
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