EDS Mum on Impact of Lost $5B IT Deal

U.K. government agency Inland Revenue has tapped Cap Gemini Ernst & Young (CGE&Y) over Electronic Data Systems for a 10-year IT outsourcing contract worth (U.S.) just over $5 billion.

The deal, which takes effect July 1, could be extended eight additional years under an option.

Fujitsu Services will serve as CGE&Y’s primary subcontractor, managing data centers, applications, IT support and disaster recovery services, while British Telecom has been tapped for wide area network and voice support.

As part of the deal, about 2,250 employees will join CGE&Y from EDS and its parnter Accenture. More than 900 workers will transer to Fujitsu Services.

A CGE&Y spokeswoman was not immediately available for comment, but wresting Inland Revenue from EDS, whose IT outsourcing services and revenues are only second to IBM’s , is clearly a coup.

For EDS, the loss of a contract that it’s held since 1994 is a blow that could hit its bottom line. A spokesman for the Plano, Texas, services giant declined to discuss the contract. Earlier, the company issued a statement saying it was “extremely disappointed” by losing Inland Revenue’s business.

“EDS will continue to support the Inland Revenue to the end of the current contract in June 2004, and will work closely with Cap Gemini Ernst & Young and Fujitsu to help ensure a smooth and successful transition,” the company said.

In addition to CGE&Y, EDS and IBM, other companies that compete for lucrative, longterm IT outsourcing jobs include Computer Sciences Corporation.

Many large companies are looking toward the service, offloading IT maintenance and support jobs for a fixed cost and reassigning its own IT staffs to research and development or core business tasks.

A Wall Street Journal report estimated that the contract loss could trim 3 cents to 4 cents per share from EDS’ 2004 earnings.

News Around the Web