EDS' Jeff Kelly: Battling for GM business
EDS of Plano, Texas, has established a "megadeal center" in Detroit staffed by 400 people devoted to retaining as much of the business it now does with GM as possible. That business amounted to $1.8 billion last year.
EDS' 10-year master services agreement with GM expires June 6, 2006, exactly one year from today.
IBM of Armonk, N.Y., is approaching the GM prize with 10 senior IBM executives supported by about 500 global team members who are committed to "pulling together an innovative and highly cost-effective proposal for the automaker," says Frank Roney, IBM's global managing director for the GM account. About 60 percent of those employees are marshaled in the Detroit area.
Pieces of $3 billion
Over about the past five months, GM has been requesting proposals from the largest computer-services companies, asking them to bid on pieces of the nearly $3 billion of information services that the automaker contracts for each year. GM outsources all of its IT work to vendors and has 2,000 employees to manage those vendors and projects.
EDS has had a lock on about two-thirds of the annual spending since 1996, when GM signed a master agreement as part of a deal that saw GM spin off EDS as an independent, publicly traded company. EDS supports 120,000 desktop computers and 290 software applications or programs for GM and is responsible for bringing new computer technology to the automaker.
Now GM is breaking its IT business into chunks, which, taken together, totals about $15 billion over five years.
"We're in the process of responding" to the proposal requests, says Jeff Kelly, vice president of EDS' GM account. "I think this competition is primarily between the Tier 1 service providers that are global in reach.
"We believe that we're going to be a significant part of GM's future. We're certainly going to be very aggressive in our competition in those segments we choose to go after."
By opening a megadeal center to respond to GM, EDS reveals just how important the GM business is to the $20.6 billion technology company. In addition to IBM, EDS is competing against other peers, including Accenture Ltd. and Hewlett-Packard Co.
EDS assembles its employees in a megadeal center only for its largest deals. EDS had a center in place in 2000 when it landed a $6.9 billion, eight-year contract to build an intranet for the U.S. Navy and the Marines and again this year when it won a $3.85 billion, 10-year contract with the U.K. Ministry of Defence.
EDS has 10,000 employees in metro Detroit, including about 1,500 who occupy a tower at GM's Renaissance Center headquarters in Detroit.
GM is EDS' largest customer, representing about 9.4 percent of the company's annual sales. EDS generated $465 million in revenues from GM during the first quarter of this year, down 8 percent from the same quarter a year ago.
EDS has pulled employees from Detroit and other EDS locations for its center. "You want a balanced blend there," Kelly says. "I believe we have all the right people on that."
Hewlett-Packard says it, too, has received a request for proposals.
"We see this as an opportunity to build on HP's 30-year collaborative relationship with General Motors," says Neal Elgersma Jr., HP's director for worldwide automotive industry.
The large services vendors are the first companies invited to bid. Scores of other technology suppliers are waiting in the wings ready to partner with systems integrators.
Because the bidding has begun, GM Chief Information Officer Ralph Szygenda declined an interview request. But he said in a statement that the work being done on the 2006 program is moving along well.
Szygenda joined GM in 1996 as information chief after the automaker already had locked into the 10-year EDS deal. Now he wants other IT providers to compete with EDS for big chunks of GM's business.
"We are pleased with the current progress and the response from IT suppliers," Szygenda said.
GM is shifting away from the EDS master agreement model to prompt competing vendors to put forward their best prices and technology.
"What we think is that GM has already gone through and decided what systems and what functions need to be outsourced away from EDS," says Kevin Mixer, research director at AMR Research Inc. in Boston. "If you think about the cost for GM to manage a relationship, my sense is GM will leverage those large contract winners to be the program management office."
GM wants its larger vendors -- EDS, IBM, Accenture, HP -- to manage smaller vendors rather than GM doing some of it, Mixer says.
EDS is securing partners with other vendors to meet the GM requirements, Kelly says.
The company also is not waiting on the expiration of its contract to propose new work with GM, Kelly adds. For example, he says that late last year EDS pitched GM a new software tool aimed at giving automakers more integrated information about GM's plants and operations.
You may e-mail Ralph Kisiel at [email protected]