Storage giant EMC was the prime mover behind Electronic Data Systems (EDS) developing its Agility Alliance partners program, according to the head of the IT services company.
"I'd been at EDS about a month and I was having a cup of coffee with Joe Tucci," Michael Jordan, chairman and chief executive officer (CEO) of EDS, said in an address to the Boston College Chief Executives' Club Wednesday. Tucci, the chairman and CEO of EMC, pointed out to Jordan that EDS' main rival, IBM, was starting to bundle all of its products and services together. "Joe said, 'We can be the virtual IBM,'" Jordan said. "That was the beginning of our Agility Alliance."
EDS went on to set up the Agility Alliance in November 2004 as a way to partner with select third-party IT companies to cut both the cost and complexity involved in supporting customers' IT operations. Partners include Cisco Systems, Dell, EMC, Microsoft, Oracle, SAP and Sun Microsystems. "It's become a very powerful tool for us," Jordan said.
Previously, the attitude at EDS could be summarized as managing "your mess for less," Jordan quipped, with the company claiming it could go into any customer situation and manage all of the IT there both better and cheaper than the customer had been able to in house. "It wasn't going to work," Jordan said. "We had to support 250 major software platforms." Under his leadership, EDS has been moving to a situation where 80 percent of the technology it's managing for customers is standards-based as opposed to the former scenario where 80 percent of the IT the firm was supporting was customized technology, he added.
Jordan came to EDS in March 2003 with the reputation of being something of a turnaround expert having led a major transformation effort at CBS, formerly Westinghouse Electric. In his Wednesday address, he compared his experiences at Westinghouse with those he's been facing at EDS, laying out two main missions inherent in any turnaround. "First, stop the bleeding, secondly, build the balance sheet," Jordan said.
"EDS at its core had built long-term relationships and a very profitable business," he said. At issue was a number of very bad existing contracts that EDS should never have negotiated in the first place, according to Jordan. One of his first orders of business when he joined EDS was to renegotiate those contracts and replace the people who'd been running those deals.
"EDS had been run for the last 15 years as a series of silos," Jordan said, with each major customer account, some 400, operating more or less autonomously. "The [U.S.] Navy account was the worst, the people running it were very autonomous" and wouldn't listen to advice from other experienced staffers, he added.
Jordan predicted that the US$8.8 billion deal with the Navy to manage the U.S. Navy/Marine Corps Intranet should finally start generating a positive cash flow for EDS in the range of about US$100 million for 2005. The account had previously hemorrhaged hundreds of millions of dollars over several years, delayed the release of the company's third-quarter financial results in 2004, and drawn the attention of the U.S. Securities and Exchange Commission.
Looking out at a major trend in business, Jordan called on the U.S. government and the corporate world to accept offshoring. "There is no way to reverse this trend," he said. "We have to welcome competition, it's how we'll get better." U.S. companies should retain their business and entrepreneurial leadership as well as control over product design, but farm out their coding and testing overseas, according to Jordan. He described proposed legislation across the U.S. to place limits on offshoring as "worrying."
EDS itself plans to double the number of staff it employs in what Jordan calls "cost-advantage locations," such as China and India.