Kraft Signs $1.7B Outsourcing Deal with EDS

Kraft Foods will hand over its worldwide IT infrastructure to Electronic Data Systems in a seven-year, $1.7 billion outsourcing deal.

Covered under the contract are data centers, hosting, telecommunications and workplace support. EDS will take over approximately 670 Kraft workers.

“World-class information technology is critical to Krafts long-term business success. Our strategy is to have the ideal mix of in-house and outsourced activities,” said Roger Deromedi, CEO of Kraft Foods in Northfield, Ill., in a statement.

“Its a big deal for us and our industry, and its a big deal for Kraft, too. This is the first time theyre going to outsource the IT infrastructure,” said Mike Klaus, EDS global leader for consumer industries and retail.

Klaus said that Kraft, which has acquired a number of consumer products companies over the years, has faced IT integration challenges in carrying out that strategy.

Klaus said EDS, Plano, Texas, was one of six initial bidders and that outsourcing broker TPI served as an intermediary in the negotiations.

According to a source familiar with the negotiations, IBM and EDS were the two finalists in the bidding.

Klaus noted that a requirement for the contract was to be able to provide IT services in 72 countries where Kraft has operations.

“While the consumer business is a global business, its managed locally. There are regulation and tax issues in different countries,” said Klaus.

He said equipment from EDS Agility Alliance partners, Dell, Microsoft and Cisco will be used in building out Krafts IT infrastructure.

“Kraft has a strategic business imperative around cost and growth. They are standardizing on the Agile platform,” said Klaus.

Although this contract encompasses only IT outsourcing, Klaus suggested that Kraft might be interested in finding a partner to handle business process outsourcing in the future.

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