Power Tools 1993 November - Disc 1/Power Tools Plus (Disc 1 of 2)(November 1993)(HP).iso/custsupp/cpetsppt/csg3p052.txt

Text File | 1992-10-26 | 26KB | 501 lines

Electronic Data Systems Corporation

Company Statistics

Chairman of the Board, President, and CEO:Lester M. Alberthal, Jr.
Worldwide Headquarters:                   Dallas, Texas
Year Founded:                             1962
1991 Worldwide Revenues:                  $7.1 billion
1991 Number of WW Employees:              70,500+

Service Products

PROFESSIONAL SERVICES

Categorized under the banners of consulting, systems development,
systems integration, systems management, and process management, EDS
offers a range of professional services. Services include business
information planning, information technology assessments, custom
application development, packaged software implementation and
enhancement, turnkey and custom systems integration, facilities
management, network management, service bureau services, and business
process management.

Service Mission/Target Market

PROFESSIONAL SERVICES

EDS strives to diversify its revenues as much as possible based on
service category, geography, and industry. The company currently earns
the bulk of its revenues from systems management services, although
consulting services is the fastest growing category of services. U.S.-
derived revenues account for 80% of the total. The relatively low
percentage of non-U.S. revenues reflects a late start in international
markets and some early mistakes.

EDS is a wholly owned subsidiary of General Motors (GM). At the time of
the acquisition in 1984, GM revenue accounted for nearly three-quarters
of EDS' total revenue. In 1991, for the first time since the
acquisition, non-GM revenue exceeded GM revenue. While manufacturing
remains the largest contributor to revenues, EDS is also garnering
revenues from the government and from insurance, financial,
transportation, communications, and energy sectors, among others.

EDS is a global provider of professional and systems integration
services. Headquartered in the United States, EDS' more than 70,500
employees provide information technology services in 30 countries.
Worldwide revenues in 1991 topped $7 billion, making EDS the world's
leading provider of information technology services. The services the
company provides can be broadly characterized as consulting, systems
development, systems integration, and systems management. A new service
category, formally identified by EDS in early 1992, is process
management, or the management of an entire business function (i.e.,
check processing or customer service) including the IT component. EDS
has been performing this type of service for years, but it is only
recently that customer interest in this type of comprehensive service
has gained momentum and warranted a modification to EDS' service model.

EDS' often stated goal is to become a $25 billion company. Chairman
Lester M. Alberthal, Jr. when discussing this goal, does not, however,
provide a particular time frame. EDS' goal is within reach regardless of
the timing. The market for professional and systems integration services
is highly untapped. The opportunity far exceeds the penetration vendors
have achieved today. To reach its goals, EDS has identified four
strategic positioning imperatives:

o Full range of service offerings
o Geographically ubiquitous locations
o Technical proficiencies
o Industry knowledge

EDS continues to expand its service capabilities across the entire
services spectrum from consulting, development, integration, and
management. It is adding new capabilities at either end of the spectrum
for business information planning and process management. As the company
continues to promote its full-service capabilities in the media and
builds its track record, growth in EDS' less traditional areas of
business should accelerate.

Despite its full-service approach to the market and its tailoring of
services to particular industries and even accounts, EDS has been able
to maintain controls over the degree of customization in its contracts.
Most of what EDS delivers is based on a core set of services that are
repeated over and over again at different customer accounts. The result
is greater profitability.

Service Offerings

PROFESSIONAL SERVICES

EDS offers a range of professional services including strategic
consulting, information technology assessments, custom applications
development, packaged software modification, turnkey and custom systems
integration, facilities management, network management, and service
bureau services.

Systems integration, systems management, and process management services
are generally long-term contracts on a fixed-price basis, while
development and consultative services may also be priced by time and
materials and/or task completion.

Services offered by EDS in the consulting category are more labor
intensive. Development, systems integration, and systems management
services are progressively more capital intensive. Process management
services are generally both labor and capital intensive. For example,
EDS may provide the IT infrastructure to automate a customer service
function and provide the labor to staff it. Value is created through the
consulting process and sustained through the use of technology. Through
consulting projects, EDS is able to establish an account presence and
identify potential projects. Consequently, EDS is expanding its
capabilities in these early life cycle professional services.

     Consulting

EDS uses its business and technological expertise to offer clients
strategic information technology consulting. In addition, EDS is in the
process of expanding its consulting repertoire to include consulting
related to business direction and operations. The result is an
integrated program for change. EDS views consulting as a process to
develop a "value proposition" for the customer. A value proposition has
three components:

o Target audience (i.e., billing department)
o Benefit offered to the audience (i.e., improving cash flow)
o Total cost of achieving the benefit

In the consulting process, EDS works closely with the customer to
identify business needs and information technology requirements. The
result is a plan for an information system architecture that typically
re-engineers the customer's business processes making the business more
efficient and profitable.

EDS has two main objectives for its consulting services. First, EDS
strives to understand the customer's business objectives. Second, EDS
searches for the best technical approach to support and achieve these
objectives. Group productivity tools, such as EDS' Capture Center, help
draw out ideas and thoughts to be used as the basis for team discussion
and analysis. Capture Center facilitates the exchange of ideas during
meetings through the use of Macintosh computers from Apple and EDS
proprietary and packaged software. Capture Center allows the recording
of ideas, without the introduction of errors through rephrasing as well
as giving the contributor anonymity. The results are more efficient
meetings and the more likely achievement of consensus.

The framework for Business Information Planning consulting services has
been implemented via one of the Centers of Service in a handful of SBUs.
The goal is to integrate the framework into each of the SBUs. The goal
of the program is to work with the end users to create a plan or process
for change that can be implemented. The plans produced as part of the
service are documented via a relational database tool. The cost of the
service, on a fixed-price basis, can range from $50,000 to $250,000. It
can take between 60 and 90 days to develop the value proposition for the
client. It is interesting to note that EDS has used the framework at
numerous entry points within an organization: enterprise level, business
unit level, process level, and product line level. Nevertheless, to be
effective, the most senior management of the client must be involved at
some point.

     Systems Development

Through systems development services, EDS works with customers to
determine how best to fulfill technology needs. Typically, EDS does not
develop a software application from scratch. Instead, the company will
customize or enhance already existing software packages or integrate a
number of software packages. Within its systems development services,
EDS includes custom application development, software licensing, and
systems design.

     Systems Integration

EDS has built a strong reputation as a provider of systems integration
services. EDS defines systems integration as the process of objectively
selecting and linking the information technology - hardware, software,
communications, processes, and people - necessary to meet the functional
requirements and business objectives of any given enterprise. Systems
integration contracts include the development of large-scale computer
and telecommunications systems. For these contracts, EDS acts as the
general contractor in purchasing hardware, software, and communications
services. Systems integration contracts may include as many as 70 to 100
subcontractors to execute large projects. EDS may also offer other
services such as training, systems operations, and systems maintenance
in conjunction with or as a follow-up to systems integration projects.

     Systems Management

EDS' definition of systems management includes larger projects that
involve the bundling of a significant number of professional services.
These projects always include systems operations and usually include
value-added services such as network support, disaster recovery,
applications development, migration, integration of hardware and
software systems, training, and maintenance. In systems management
contracts, EDS develops, operates, maintains, and upgrades the client's
technical infrastructure.

Facilities management services are a major portion of EDS' systems
management business. The company equates facilities management services
with data center operations management, which focuses on the operation
of hardware and network systems. Facilities management services, which
represent the bulk of EDS' business today, require EDS to offer some or
all of the following services:

o Industrial engineering
o Systems design
o Hardware selection
o Systems programming
o Systems installation
o Computer operations
o Data processing
o Network management
o Remote data storage
o Systems maintenance
o Education and training

Typically, facilities management contracts do not include value-added
services such as applications development, migration planning, etc.

It is important to note that EDS does not differentiate its facilities
management services from systems management services on the basis of
whether or not the customer elects to transfer capital assets to EDS.
Rather, the key factor is the scope of the project, as defined above.
This distinction is of particular importance when comparing EDS to other
providers of systems management/facilities management services who do
make distinctions on this basis.

When possible, EDS prefers that customers transfer their assets to EDS.
The customer benefits from a cash infusion that can be used to support
core business operations. By redeploying their assets, customers move
information technology off the balance sheet and transform it to a
yearly expense. Furthermore, EDS has the money, experience, and
infrastructure to facilitate this transfer and can achieve economies of
scale, thus lowering the cost of providing services as compared to a
customer using its internal resources. When transferring assets, EDS
prefers to hire the customer's staff, adding them to the EDS talent
pool.

EDS believes that there is significant demand for the transfer of
assets, particularly under the economic conditions existing today.

     Process Management

EDS defines process management as those services provided to manage a
business process that leverages EDS information technology capabilities
and industry knowledge. Three prime examples of process management
services are:

o Claims Processing: EDS delivers the technology as well as the staff
  and knowledge to perform this insurance industry function.

o Cadillac Roadside Service: EDS provides the technology and staffs
  Cadillac's roadside service centers. (This service is also provided
  for Buick, Oldsmobile, and Chevrolet.)

o AT&T Telemarketing: EDS provides the technology and know-how to
  staff a telemarketing function for AT&T. Compensation is based upon
  the percentage of customers EDS is able to "win back" for AT&T.

     EDS as a Fiscal Agent

EDS can also perform as a fiscal agent. These services include all those
mentioned under facilities management, as well as services tailored to
the customer's requirements. As an insuring agent, EDS will function as
an insurance company for a federal program or private group. In these
arrangements, EDS receives premium payments from the contracting
organization and assumes responsibility for benefit payments and
underwriting the risk.

     Additional Services

The EDS service portfolio includes additional services that enhance one
or more of the primary services described above. These include network
services, desktop equipment procurement, configuration and maintenance
services, disaster recovery, and contingency planning. In addition, each
SBU develops and promotes service expertise and products tailored to its
particular industry focus or geographic needs. Such services might
include CAD/CAM, electronic data interchange (EDI), card processing
services, international banking systems, document image processing, data
center design and construction, etc.

Service Delivery

PROFESSIONAL SERVICES

EDS views itself as being in the information technology services
business. As such, technology is viewed as very important; however, it
is merely a synergist. In other words, technology enhances the
effectiveness of EDS as it provides services to its customers.

EDS believes its technology is a means of differentiation among
competitors. Multiple approaches to solve a particular technical problem
allow the company to avoid the risk of developing dependencies on any
single technology. For example, EDS uses multiple transmission media for
voice, data, and video communications such as copper wire, fiber optics,
microwave, and satellite communications. The variety and depth of EDS'
technological expertise allows for flexibility in contract negotiations
and enables the company to offer customers cost savings and performance
efficiencies over and above their current mode of operations.

EDS employs various tools and methodologies as it delivers services to
its customers. These methodologies include business planning, technology
planning, and information technology planning - the convergence of
business and technology planning. In addition, EDS follows a proprietary
life cycle methodology called Systems Life Cycle that begins at the
information technology planning phase and follows classical systems
development processes to carry a project through to implementation and
production support. EDS' consistent methodology is automated through the
use of computer-aided software engineering (CASE) tools. EDS uses CASE
tools throughout the service delivery process to automate and
standardize:

o Project management
o Front-end data collection and analysis
o Reverse engineering
o Systems development and maintenance
o Testing management
o Software distribution and promotion

     Technical Infrastructure

The technical infrastructure developed by EDS to deliver information
processing services on a global basis is extensive. The technical
infrastructure supports the development of open systems and
client/server solutions as well as the more traditional mainframe
systems. EDS provides systems management services through 15
sophisticated information processing centers (IPCs) located in the U.S.,
Canada, Brazil, and Europe. The IPCs are tied together by EDSNET, EDS'
global computing and telecommunications network. EDSNET links the IPCs
into a single, fully integrated network. The information management
centers (IMCs), located in Plano, Texas, and Stockley Park, England, are
at the center of a hub of EDS technology. The IMCs monitor the movement
of voice, data, and video communications through EDSNET worldwide.
Twenty percent of EDS' infrastructure is international.

Within the IPCs and IMCs, most of the hardware (i.e., mainframes,
terminals, data storage devices, etc.) are supplied by Amdahl, Hitachi
Data Systems, Digital Equipment Corporation, and IBM.

EDS' technical infrastructure is centralized to provide reliable,
ongoing, and consistent service to customers at low cost. Six main
systems management functions, each made up of a myriad of processes and
procedures, enable EDS to deliver its service quickly and efficiently:

o Consumer interface (applications and procedures)
o Configuration management
o Operations
o Inventory management
o Accounting
o Security

EDS has more than 70,500 employees provide information technology
services in 30 countries.

Service Marketing/Pricing

PROFESSIONAL SERVICES

EDS' approach to marketing and sales can best be described as proactive.
The company makes a concerted effort to understand the business
processes in the industries it targets and to formulate value
propositions that solve a particular business problem that players in
the industry are facing. EDS' sales and marketing emphasis is on the
business solution rather than the technology. The key question is, "What
does the market want to buy?" not "What does EDS want to sell?" By
focusing on customers' critical success factors, EDS believes it can
shorten the sales cycle, which tends to be quite long for professional
and systems integration services (six to 18 months).

EDS sells its services directly, rather than through alternate channels.
Nevertheless, the company does take advantage of leads from its business
partners and does joint marketing. While EDS prefers to be the prime
contractor on its projects, it will at times subcontract to another
company depending upon the circumstances. The EDS sales force is
surprisingly small. EDS has only about 500 sales representatives,
representing less than 1% of the total employee population. As an
example, the Transportation SBU, one of EDS' key targets for growth in
the 1990s, has approximately 2,000 employees. Of the 2,000 employees,
only about ten to 15 are in sales.

The EDS sales commission programs are administered at a corporate level,
although the individual SBUs are given a lot of latitude in how they
organize and structure their sales forces. At the SBU level, sales
people may be organized by:

o Geography
o Industry subsegment
o Line of business

A number of different commission plans accommodate the SBU organization.
There is an annual recognition award and banquet for those who exceed
their quotas. In addition, as part of the EDS culture, managers may use
their discretion to reward exemplary performance.

EDS has a corporate marketing group that focuses on issues that affect
the entire EDS organization, including market analysis and strategy,
market research, competitive analysis, marketing communications, and
business development. In addition, corporate marketing provides support
to each of the SBUs. Each SBU has its own marketing group to support its
industry- or geography-specific activities. The SBUs function
independently, creating their own sales collateral, performing market
research, developing market segmentation strategies, etc.

EDS understands that professional and systems integration services are a
reference sale. In its favor, the company has a strong proven track
record and is financially stable - two very important considerations for
potential customers. However, in 1989 the company realized, as a result
of a market awareness study, that it was relatively unknown and not well
understood. Consequently, EDS embarked on a major advertising/ media
campaign in 1990 to raise its profile. The primary goals of the first
phase of the campaign were to increase market awareness, raise the
understanding of EDS and its capabilities, and create a market image
consistent with its strategic intent. A secondary goal was to contribute
to employee focus and spirit. The first round of ads (including a
television commercial) very successfully told customers that EDS does
much more than facilities management. Now EDS' primary objective is to
demonstrate results. The advertisements present success stories such as
EDS' relationship with Apple Computer. The Apple Computer advertisement
highlights the benefits of using technology to improve business
processes such as the globally networked imaging system EDS developed
for Apple.

EDS runs its magazine advertisements in all of the major business
publications from the Wall Street Journal to the Harvard Business
Review.

EDS also recognized the influence of the trade press, the general
business press, and industry analyst community on marketplace
perception. In response, the company has been much more open in talking
to the press and the industry analysts, who very often influence what is
said in the press. In fact, EDS has established a market relations group
within its corporate marketing organization to manage relationships with
analyst firms and other organizations such as institutions of higher
education. Each year, starting in 1991, EDS plans an information forum
for industry analysts to educate the market influencers about EDS'
strategies and service initiatives. This forum is in addition to the
annual meeting held by investor relations for the securities and
financial analysts. As a result of its efforts, EDS is in a better
position to influence its marketplace image to its best advantage.

EDS has also opened an impressive exhibit at the InfoMart in Dallas,
Texas, to serve as a marketing tool. Potential customers are invited to
tour EDS' exhibit featuring industry-specific applications of technology
in a Disney Land-like setting. The exhibit and films produced especially
for EDS provide concrete examples of EDS' capabilities and the benefits
of applying technology.

Perception/Evaluation

PROFESSIONAL SERVICES

Lester M. Alberthal, Jr. has often articulated EDS' goal of being a $25
billion company. The market potential for professional and systems
integration services demonstrates that the market penetration of vendors
thus far is minimal when compared to the dollars available within
customer budgets. If EDS continues to increase its business on par with
the growth of the market in general, EDS should reach its goal of being
a $25 billion company by the year 2000. The organizational structure and
management team will be challenged to manage an organization large
enough to support $25 billion in revenue. The SBU/SSU organization,
succession planning, and leadership training will be assets throughout
the next decade. The beauty of EDS' current organization is its
fluidity; SBUs/SSUs are created and disbanded as needed. At the same
time, EDS is training the next generation of corporate managers through
SBU/SSU leadership assignments. Furthermore, EDS' current management has
the foresight to pilot new organizational structures such as the Centers
of Service.

A major target for growth in the 1990s is business consulting. EDS views
front-end consulting as the gateway to the back-end, large integration
and management deals. EDS is expected to make major investments in
resources to provide top quality consulting services and in marketing
communications to project an image congruent with its strategic intent.

While EDS contracts are typically large, multimillion dollar agreements
spread over a number of years (three to ten), EDS is now pursuing
smaller projects and companies, especially those with the potential for
major follow-on business. As EDS increases its revenues in the
consulting end of the services spectrum as a percentage of total
revenues, it can expect to see its revenue per contract decline.
Consulting projects tend to be smaller and more focused in scope than a
systems integration or management deal.

EDS will continue to focus on specific industries, including increasing
the availability of software applications. Focal industries are those
experiencing above average levels of change, whether it be from economic
pressures (i.e., airlines) or rapid growth (i.e., telecommunications).

EDS currently measures its success via the success of its customers.
This definition of success will be expanded to reach beyond the
relationship between EDS and its customers to extend all the way to the
customer's customer. This focus requires not only an in-depth
understanding of the customer's business issues, but an exhaustive
insight into the market issues. The current EDS model for impacting
customers is centered on what Michael Porter defines as the customer's
value chain. EDS contributes to customer performance by impacting the
activities internal to the customer's organization. The new model looks
at the value chain within the total market context. This new model will
require EDS to be even more proactive but will bring the company closer
to its goal of providing services to clients that are "legendary."