The Hindu Business Line : The deal that came through

EDS has walked away with a lion's share of the multibillion-dollar five-year IT services contract signed with General Motors recently. The GM contract renewal, with a total spend of $15 billion, was one of the largest commercial contracts up for bidding. Out of $6 billion, which was up for grabs in the first phase, EDS has bagged $3.8 billion, with key vendors such as HP and Cap Gemini bagging the rest. Since EDS continues to offer other IT services to GM outside this renewed contract, it expects to clock annualised revenues of $1.2-1.4 billion from GM over the next five years.

A day after the deal was signed, eWorld spoke to Chet Kapranski, Managing Director for EDS - GM Asia-Pacific Operations, who was in Chennai, about the overall scope of the GM deal.

WHAT are the broad contours of this deal with General Motors, since the company has not spelt it out in great detail?

The client has said it is a $15-billion IT spending spread over five years. The award that was officially announced comprised about $6.1 billion; 43 request for proposal (RFPs) were floated for this purpose and awarded to different companies. Out of this, EDS has bagged $3.8 billion over five years, which was up for recompete (or renewal). Think of this deal as software maintenance, running infrastructure, etc. In the future, GM will make a decision on upgrading hardware and software and that will be a part of a separate deal for the remaining amount (of $9 billion).

Since this was a mega deal up for renewal, how did GM approach this deal?

First and foremost, the IS&S (Information Systems and Service) executive team gained support from the GM strategy board and key executives that this (multi vendor outsourcing) was the right approach to take. GM was looking at information technology to accelerate this process. You may have heard of the term `third generation outsourcing.' (In this context), the first generation was when GM acquired EDS.

The second generation was when they spun us off. When they spun us off, there entered a 10-year master services agreement (with EDS), which is set to expire in June 2006.

The third generation is the evolution of the industry and it is a case of multi vendors or best-of-breed vendors trying to give the best of IT to GM.

How are the terms of the GM contract structure, purely as time and material or as fixed contracts?

The contracts are global in nature. It was viewed and analysed from a global perspective. GM will certainly look for productivity gains in any contract with service providers. When we responded in a particular segment, we had to demonstrate that we could deliver the service globally and seamlessly.

(The contract) consisted of several parts of the automotive value chain, say, from engineering, manufacturing or business services, which could be the underlying finance or HR. We support GM's idea of having common systems globally.

Since you operate out of Shanghai, do you see China emerging as a competitive low-cost location for IT services?

Speaking in general (and not specifically in relation to GM), when you look at the competencies of the Chinese global industry, it is pretty good. But they need to continue to work on CMMi (Capability Maturity Models) or process improvements and things like that.

I believe they will be a formidable player in the near future. They are quite good if you look at competencies such as SAP, Oracle and Java as well as some of the legacy stuff.

maverick@thehindu.co.in

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