EDS realigns units, promotes three execs

Electronic Data Systems Corp. (EDS) is reorganizing its three largest business lines in an effort to win IT business away from the Big Five firms.

EDS said Friday it will dissolve its Information Solutions, E Solutions and Business Process Management units and reconstitute their elements into two new internal organizations, Operations Solutions and Solutions Consulting. The changes will take effect April 15.

EDS clients shouldn’t experience any disruptions as a result of the reorganization and will benefit from the company’s increased integration, said spokesman Jeff Baum. The moves are intended to better align EDS’ capabilities and improve its positioning within the services market, according to the company.

“There are two very hot spaces in the IT service market that we are putting more resources behind: business process outsourcing and solutions consulting,” Baum said. “This gives us a set of offerings that puts us toe-to-toe, head-to-head with the Big Five.”

Plano, Texas, EDS also sees an opportunity to grab share in a shifting market.

“Right now, there’s a lot of people who don’t want to do consulting work with their accountants. We’re going to go after that,” Baum said.

The Big Five accounting firms are feeling pressure to stop providing services, such as IT consulting, that aren’t related to their core auditing services. Critics contend that accounting firms get into conflict of interest situations when they sell certain consulting services to clients that they audit. This issue is now in the spotlight because Big Five firm Arthur Andersen LLP audited and also sold consulting services to Enron Corp., whose accounting practices are the center of its bankruptcy scandal.

Operations Solutions will encompass EDS’ mainstay IT outsourcing operations, which include the work previously done under the Business Process Management unit’s umbrella. That division handled outsourced business transactions, such as financial transactions and health care claims processing, along with CRM functions such as call centers.

EDS’ new Solutions Consulting will absorb E Solutions’ IT consulting, systems development and implementation services and combine them with EDS’ applications development business, the company said.

The Operations Solutions unit will be run by Doug Frederick, currently president of EDS’ Information Solutions. Paulett Eberhart, now president of Information Solutions U.S., will become president of Solutions Consulting. Both will report to EDS Chairman and Chief Executive Officer Dick Brown.

E Solutions President John McCain will leave EDS to pursue other interests, the company said.

EDS also promoted Executive Vice President of Operations Paul Chiapparone to vice chairman.

Staying out of the fray are EDS’ PLM (product lifecycle management) Solutions and A.T. Kearney management consulting units, which will continue to operate independently.

There will be no layoffs directly related to the reorganization, according to EDS spokesman Jeff Baum.

“This is not focused on anything but growth,” he said.

EDS’ realignment comes at a time when many companies are grappling for a position in the lucrative services market. Lou Gerstner, who recently stepped down as IBM’s chief executive officer (CEO), declared IT services “the future of the IT industry” and the core of his revitalized Big Blue, while Hewlett-Packard Co. Chairman and CEO Carly Fiorina cited the services strength of a combined HP and Compaq as a key advantage of the acquisition.