Electronic Data Systems (EDS) expects to double its workforce in developing nations such as China and India, according to the company's head, over the next two to three years. Currently, EDS staff in those geographies number between 15,000 to 20,000. At the same time, the IT services firm is continuing its restructuring efforts that include the ongoing reduction of headcount in the U.S. and Europe.
Michael Jordan, chairman and chief executive officer of EDS, was brought on board in March 2003 to turn around the company, which had been beset with financial problems and some deeply unhappy customers. In September 2004, Jordan announced EDS would lay off between 15,000 and 20,000 staff over the coming two years as part of the turnaround as well as a major re-engineering of the company. Over the past two and a half years, EDS has shed about 13 percent of its staff, he estimates.
"We've got a way to go [on the turnaround]" Jordan said in a press question-and-answer session following his address to the Boston College Chief Executives' Club Wednesday. "We're about halfway through. There's a lot of issues as we transform our environment. Industrial engineering is what we're doing," he added.
EDS needs to do a lot more to automate its business since too much is still left to "manual hand-offs," according to Jordan leaving sizeable room for error. "We need a significant improvement in quality as well as a significant improvement in cost," he said.
Jordan said that EDS is looking to develop capabilities in Dalian in China and plans significant investment in the country as a whole. As a trade-off, EDS expects to realize more business opportunities with China's state-owned enterprises, he added. The company is also ramping up its operations in India in parallel with its efforts in China, he added. However, EDS is having to deal with high staff turnover, sometimes reaching the 40 percent mark, among its workers in India, given the highly competitive nature of the jobs market in that country.
EDS has resolved issues with the U.K. government over a number of faulty systems and the company is also optimistic on its previously troubled contracts with the U.S. Navy, according to Jordan. The firm's business with the Navy had previously hemorrhaged cash to the tune of US$800 million in 2003 and US$400 million in 2004, he said. For 2005, he expects the deal to generate positive cash flow in the order of US$100 million or more, Jordan added.
The company's proposed management buy out of its A.T. Kearney consultancy business announced earlier this month makes sense since the business "is not adjacent to what we do," according to Jordan. He said the unit would be "better off put back on its own."
Despite the appearance of Indian players like Wipro, Infosys Technologies and Tata Consultancy Services in the outsourcing arena, Jordan continues to regard IBM and Accenture as the prime competitors for EDS.