EDS to Step Up Outsourcing Efforts

In its continuing efforts to help recession-weary business hold down
their routine costs, EDS Tuesday announced details of its high-availability
web hosting service in collaboration with computing heavyweights: Microsoft,
Compaq and Intel.

Using the backdrop of the Comdex show in Chicago, the Plano, Texas-based
data services provider detailed its hosting initiative, EDS Managed Web
Hosting Services. The service uses Microsoft Windows 2000 Datacenter Server
(which claims 99.999 percent service availability — otherwise known as five
9s) to deliver scalability on Intel-architecture-based solutions with
Compaq as the hardware integration partner. EDS Managed Web Hosting Services
is part of EDS Managed Hosting Services, which offers certified packaged
services for Web hosting, application hosting and storage, managed in a
shared or dedicated environment.

EDS’s value proposition is to help build scalable solutions for customers
(corporations, large dot-coms, application service providers, enterprise
customers) at a time when capital expenditure budgets are being held in
check. Rather than building up on infrastructure in-house through expensive
investments, EDS wants perform many of those functions for
EDS calls it “infrastructure outsourcing” but some analysts just call it

In fact, EDS (which makes 89 percent of its revenue from outsourcing) will
benefit from the latest wave of corporate restructurings, according to
Gregory Gould, analyst at Goldman Sachs.

“They’re getting better at marketing themselves. They used to be known as
just a data center company. But now they’ve gotten better at letting
customers know about new services,” Gould said.

And EDS has certainly been adding services. In the first quarter alone,
the company acquired Sabre’s airline infrastructure outsourcing business for its
transportation practice and is even taking a stab at wireless networking. Just yesterday, it acquired Systematics AG of Germany.

Gould attributes much of EDS’s renewed vigor on an innovative sales
approach initiated last year. Instead of a products- or services-approach to
the sales team, client executives now manage account relationships allowing
them to capitalize of more upselling (i.e. selling to existing rather than
new customers) opportunities.

“Now they are better at understanding their own services and marketing
them to the customers,” Gould described.

EDS is projected to report first quarter earnings of 56 cents a share. In
recent trading, its stock was down 0.95 at $54.10.

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