EDS: Is the criticism deserved?

Many an outsourcing professional’s eyebrow was raised two weeks ago, when the Ministry of Defence awarded a mammoth £4bn contract to EDS.

EDS has, at times, been viewed as the government?s IT division, winning 60% of the value of all UK public sector outsourcing contracts. But the company’s reputation has been blighted by a catalogue of public sector outsourcing disasters.

The Inland Revenue divorced the firm last year for failing to deliver a successful tax credits system. Rightly or wrongly, EDS was the main scapegoat.

Another EDS relationship that went sour was with the US Navy, whose $8.8bn (£4.5bn) intranet project has been dogged by delays and technical difficulties.

EDS had to take a $599m write-down in deferred costs and the project has incurred $2bn in operating losses since inception.

Despite these highly publicised failures, you would be wrong in thinking the blame can be laid solely at EDS’s door. Problems arise for many reasons. The sheer size of such projects make it virtually impossible to run them without any problems whatsoever.

The public sector is also more accountable than the private sector. Funded by taxpayers’ money, every step of a public sector project is closely monitored by press and public. By contrast, any cracks in private sector outsourcing projects are more likely to be papered over ð clients are all too aware of how negative publicity can affect shareholder value and customer perceptions.

Failure can also be down to end-users if they have the upper hand in negotiations. Many organisations, keen to wring every penny of effort out of their supplier, will give partners unrealistic targets.

But the way in which EDS has broached the new MoD contract is different. For a start it is part of a consortium ð an approach to outsourcing that is an increasing trend. EDS leads the MoD Atlas consortium of Fujitsu Services, General Dynamics, EADS and LogicaCMG.

Many outsourcing projects fall by the wayside because it can be extremely challenging for one partner to fulfil all the requirements generated by a giant organisation. A single organisation cannot realistically be an expert at everything, and co-partnering is a way of recognising this factor.

The consortium approach has numerous benefits. For a start, it is less risky. Organisations are not necessarily putting all their eggs in one basket, as they are with a single supplier.

It could also make them more competitive. Organisations often fret over outsourcing all IT services to the same supplier that their competitors are using. Spreading the work through a consortium can be a way around the competition issue, as different combinations of partners would work with different end-users.

It also gives the client better access to more professional resources at the right quality and scale, and more influence over which part of the consortium looks after which areas.

There is no denying that winning the MoD contract has given EDS the boost it sorely needed to start rebuilding its public profile. It is also true that the company will be under the spotlight to deliver. If this project goes belly-up, it will prove damning in the eyes of the business community and also in the eyes of the public sector.

But the consortium set-up is a wise move. More and more consultancies and outsourcing providers are realising that there is more to successful business survival than the single-minded pursuit of aggressive self-centred competition. Working together can be even more fruitful than playing the solitary game.

Nigel Roxburgh is a director of the National Outsourcing Association