Partnering Up with Vendors

By Stan Gibson  |  Posted 2006-01-22 Print this article Print

The group consists of Sun Microsystems Inc., Microsoft Corp., Dell Inc., EMC Corp., Oracle Corp., Cisco Systems Inc., SAP AG and Siebel Systems Inc.

"Were implementing established technologies," Jordan said. "Very rarely do you want something from the labs to run your business on."

For the most part, the vendors in the alliance, have, like EDS, an intense rivalry with IBM. "We believe we can provide a better alternative to IBM," said B.J. Jenkins, vice president of global marketing at EMC, in Hopkinton, Mass.

What Ahold saw in its bid from EDS is what other customers can expect to see: a standard set of technologies and vendors but enough wiggle room for customers to have it their way, within reason.

GM shakes up the outsourcing industry. Click here to read more. EDS new, disciplined approach eschews the go-go days of the Brown era, which saw the company ink deals with questionable margins and onerous terms nearly impossible to meet. Such signings resulted in albatrosses such as the NMCI (Navy Marine Corps Intranet) deal in 2000, which racked up EDS losses to the tune of $800 million a year at its nadir.

Jordans arrival in 2003 marked a spate of renegotiations of bad deals such as the NMCI contract. Other renegotiated deals include a $4.7 billion, five-year pact with the United Kingdoms Department for Work and Pensions.

Fortunately for EDS, customers listened to its plight and responded—not necessarily lowering the bar or otherwise offering concessions, Jordan said, but by altering service-level agreements to be achievable by EDS, while still guaranteeing good service to customers.

Perhaps humbled by its reversals, the new EDS has learned to listen as well, said Vanderkaluw.

At different Ahold-owned stores, such as Stop & Shop Supermarket Cos. in the United States, Ahold has specific service levels it insists on. "We demanded our own service levels," Vanderkaluw said. "[EDS] started listening to what we wanted. I compare it to 10 years ago, when they offered a specific service level, and you had to take it."

Even with its particular needs, Ahold was open to EDS standardized, Agility Alliance pitch. "EDS brought their standard approaches for service management [to] the table. Its already working with other companies," Vanderkaluw said. "They convinced us that the solution they had now was what other companies were doing."

But, once again, Ahold demanded flexibility from EDS and got it, insisting that IBM storage gear be included in the bid. "In their first bid, they had EMC in their solution. But we said we had a lot of IBM," Vanderkaluw said. "We talked to EDS and explained the impact of changing our platform. We are not converting to the standard platform that EDS is using." Vanderkaluw said he was willing to accept a higher price in return for EDS accommodation of IBM equipment.

Accommodating the IBM gear took some doing, however. Jordan has given marching orders to his troops never to sign a deal that deviates from Agility Alliance offerings without his personal approval. That was needed in the case of Ahold.

"EDS had to go back to Plano. They have strict procedures to offer this solution and the pricing ... The process of dealing with deviations also worked," Vanderkaluw said.

Like many customers over the past few years, Ahold did serious due diligence to assure itself that EDS woes were not terminal in nature.

"During the RFP [request for proposal] process, we looked at the problems that EDS had had," Vanderkaluw said. "We looked at where and why there were problems, like with the Navy contract. We worked with McKinsey [& Co.] and other advisers, like banks, and got the idea of where EDS was. We thought they were well on track with their recovery."

Nonetheless, he added, "We also put in clauses in the contract if things go wrong." Those clauses amount to an ability to break the contract without penalties, should EDS corporate health take a turn for the worse.

Aholds caution notwithstanding, analysts buy into Jordans optimism. "EDS was like a wounded lion. EDS healed some of its wounds and is coming back stronger than it used to be. EDS is definitely back," said Eugene Zakharov, an analyst with Technology Business Research Inc., in Hampton, N.H.

Back? Perhaps. Great? Not yet. TBR maintains that EDS lags in making effective use of offshore resources. TBR said EDS offshore head count is now 14,200 people, or 12.1 percent of its work force. In contrast, TBR said Accenture has 19.5 percent of its people offshore, and IGS has 13 percent. Affiliated Computer Services Inc. leads the pack with 33 percent of its work force offshore, according to TBR.

Unless EDS can gain greater savings from shipping work to low-cost destinations, it will be hard put to offer aggressive pricing and still maintain its margins, said TBR analyst Patrick Sayers.

Click here to read more about EDS turnaround and globalization. IGS continues to loom as EDS toughest competitor. The IBM unit won a $2.2 billion deal in September from ABN AMRO Bank N.V., beating EDS. "They won that. They did a good job on that," Jordan said. "They had a pretty big position there already. We had a small position."

Despite having vast expertise among its ranks, EDS often fails to bring that to its customers, said Gartner Inc. analyst Lorrie Scardino in Stamford, Conn.

"Theyve got a lot of people who would be qualified as consultants but arent being used as consultants," Scardino said. "They need to get vertical-industry knowledge to the point of engagement."

And the Agility Alliance has to endure to become something more than a marriage of convenience for all concerned. Some partners could go off in their own directions. EMC, for example, is known to be counting heavily on its own services revenue for the future.

But EMCs Jenkins insisted the partnership is alive and well. "Weve been working very well together, and there has not been any friction, really," Jenkins said.

Check out eWEEK.coms for the latest news, views and analysis on servers, switches and networking protocols for the enterprise and small businesses.

Stan Gibson is Executive Editor of eWEEK. In addition to taking part in Ziff Davis eSeminars and taking charge of special editorial projects, his columns and editorials appear regularly in both the print and online editions of eWEEK. He is chairman of eWEEK's Editorial Board, which received the 1999 Jesse H. Neal Award of the American Business Press. In ten years at eWEEK, Gibson has served eWEEK (formerly PC Week) as Executive Editor/eBiz Strategies, Deputy News Editor, Networking Editor, Assignment Editor and Department Editor. His Webcast program, 'Take Down,' appeared on He has appeared on many radio and television programs including TechTV, CNBC, PBS, WBZ-Boston, WEVD New York and New England Cable News. Gibson has appeared as keynoter at many conferences, including CAMP Expo, Society for Information Management, and the Technology Managers Forum. A 19-year veteran covering information technology, he was previously News Editor at Communications Week and was Software Editor and Systems Editor at Computerworld.

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