EDS, Sun Aim High With Partnership

Electronic Data Systems Corp. and Sun Microsystems Inc. will launch this week a more formalized partnership to sell and promote each others wares with a program that is expected to net the two companies a combined $3 billion in new business.

The alliance reflects a broader trend in the IT industry in which service companies are aligning much more closely with manufacturers—whether its hardware, as is the case between EDS and Sun, or software, as in the Avanade joint venture between Accenture Ltd. and Microsoft Corp.

The program builds on a relationship created 18 months ago. But how much more business the two will do under the program is unclear. They do, however, have joint revenue targets.

"When you set revenue targets of $3 billion—thats pretty ambitious," said Tom Rodenhauser, principal at Consulting Information Services LLC, in Keene, N.H. "The IT services industry is moving so closely to producers and service providers being one that in the near future these types of partnerships wont matter—the vendors and service providers will be one and the same."

Under the new Continuum of Services program, Sun this week will provide hardware, software and architecture while EDS supplies IT consulting services, according to officials of both companies. The five-year deal is not exclusive, but each will operate as the preferred provider of its respective offerings.

"Sun is the strategic choice for EDS in the Unix space. Well lead with them in any case that it makes sense," said John Wilkerson, vice president of global alliances at EDS, in Plano, Texas.

Officials said the deal was made possible because the two companies have similar and complementary cultures. "EDS is a powerhouse in outsourcing, Sun a leader in Web presence on a platform, with leading servers, iPlanet and so on," said Darlene Yaplee, vice president for sales and global solution integrators at Sun, in Menlo Park, Calif. "This takes two best-of-breed leaders combined with choice; Sun will have to compete to have the best hardware."

Suns strong presence among small and midsize enterprises should open doors for EDS, according to officials.

Joint offerings planned include Web site management, data center outsourcing and application service provider hosting services based on Suns Enterprise servers, Sun StorEdge products, Sun Open Net Environment architecture, and Java and iPlanet software. Sun will also provide technical consulting, along with EDS system implementation, integration services, consulting and outsourcing.

Its not clear how the $3 billion in expected new revenue will be split, but Wilkerson likened it to similar models, where the ratio of service revenues to hardware sales or software license revenues is about 3-to-1 or 4-to-1.