RealTime IT News

EDS Scores $4.5 Billion Outsourcing Deal

Bank of America Thursday sealed a $4.5 billion managed network outsourcing services agreement with EDS , under which EDS will take charge of Bank of America's end-to-end operations.

Beginning in February, EDS will provide Bank of America's carrier services, establishing a "one-stop-shop" for voice and data. EDS will also redesign and implement solutions for Bank of America's optical network and provide the company with help desk operations support.

"We chose to partner with EDS because this is what they do best," said Don Obert, technology services executive for Bank of America. "This agreement will help us achieve best-in-class delivery of products and services. It's important for us to capitalize on the expertise of partners like EDS to help us align our resources with business needs, to be better prepared for future growth and to support our ongoing efforts to improve service quality."

The deal comes a month after EDS lost a $5 billion contract with JP Morgan Chase to rival IBM , part of a string of wins for IBM over EDS. In the same week, IBM beat out EDS for an outsourcing contract worth about $679 million with DBS Bank of Singapore.

IBM has been playing hardball against EDS in the space. Of the more than 3,000 patents IBM won in 2001, more than 1,500 were for infrastructure technologies such as software, servers and storage systems.

EDS has also suffered due to its exposure to WorldCom's and US Airways' bankruptcies, which ate into its profits in the third quarter and may have played a role in the Plano, Texas-based company's October decision to slash costs by laying off up to 5,600 employees and selling $500 million worth of "non-strategic" assets.

Outsourcing represents one of the few, if any, growth areas for technology vendors in the financial services vertical. Technology research firm Dataquest, a unit of tech research firm Gartner, has estimated that worldwide financial services business process outsourcing (BPO) revenue will grow by 9.3 percent this year to $41.3 billion, helped by a surge in interest from financial services firms.

For financial services firms, the research said, the drive to outsource more processes goes beyond cost-cutting mandates in the wake of a recent recession, accounting scandals and even the impact of Sept. 11 that have hit firms' profits.

Dataquest noted that Internet platforms for new services and emerging new business models among vendors are also driving the surge in interest.

As a result, financial services that were once considered more sacrosanct in banks' customer relationship arena, such as cash management, mortgage origination and lending, are increasingly part of outsourcing considerations.