Under new leader, Plano-based EDS adapting to H-P vision

PLANO, Mar 15, 2009 (The Dallas Morning News - McClatchy-Tribune Information Services via COMTEX) -- EDS | Quote | Chart | News | PowerRating -- Electronic Data Systems Corp. is gone.

But "EDS, an H-P company," is just finding its sea legs.

"This year is a key year to get a lot of stuff done," said Joe Eazor, 46, now the top-ranking executive at Plano-based EDS.

The company's sale to Hewlett-Packard Co. last year for $13.9 billion ended EDS' high-profile run as a public company.

But EDS remains hugely influential in the technology outsourcing industry and in the Dallas-area economy.

H-P is still working through nearly 25,000 job cuts announced a month after the deal was completed last August. And analysts say that H-P needs to engineer a fundamental change in the types of products EDS sells before the deal can be as profitable as H-P would like.

Eazor, now senior vice president and general manager, helped plan the transfer of power to H-P last year as an EDS executive vice president.

He took over the top job at the company after former chief executive Ron Rittenmeyer stepped down at the end of last year.

Eazor stresses that EDS will continue to focus on customer service.

"Customer service always comes first," he said. "And so part of my role has been to ensure that we don't, in this integration and change, drop any balls."

Eazor seems a different, more laid-back leader for EDS, as he complained good-naturedly about having to don a coat and tie for an interview and photo shoot.

One of the company's legacies is a series of executives who, for better or worse, boasted supersize personalities.

Founder Ross Perot was the captain of a company he staffed largely with ex-military personnel, and he famously planned a helicopter rescue of EDS employees trapped in Iran in the 1970s.

Perot was also known for instituting a suit-and-tie-and-buzz-cut look for his workers.

In the late 1990s and early 2000s, Dick Brown tried to put his authoritative stamp on EDS. He is widely seen now as a failure who nearly drove the company into bankruptcy.

Former CEOs Michael Jordan and Rittenmeyer, both hard-chargers and turnaround specialists, pulled the company back from the brink.

Rittenmeyer's legacy

Rittenmeyer, in particular, made it his mission to cut costs by transferring jobs out of the U.S. to low-cost countries such as India.

It was a move that analysts said was long overdue, although the cuts clearly engendered resentment among some employees.

Eazor praised Rittenmeyer and said his work to shift more jobs and resources to low-cost countries will pay off soon.

"Under Ron's leadership, we did a really good job of building capabilities in those areas," he said. "Now the goal is to leverage it as we sell and deliver our services."

But Peter Bendor-Samuel, chief executive of Everest Group, a Dallas-based outsourcing consulting firm, said the sale ultimately represented a defeat for Rittenmeyer and his immediate predecessors.

He said Brown, in particular, was responsible for downgrading EDS to a commodity business.

"By the time Jordan and Rittenmeyer got there, it was too far gone to reverse," he said.

And Rittenmeyer's singular focus on cutting costs never fully lifted EDS out of those doldrums, as reflected in the company's stagnant share price.

"The fact that Rittenmeyer and company sold out was an admission that 'we're really not the best owners of this thing,' " Bendor-Samuel said. "I think at a very real level, it was a defeat."

Turning that loss into victory will require changing how EDS operates, Bendor-Samuel said.

He said EDS has traditionally focused on huge deals that require customers to buy a full suite of EDS products and services, and those projects are slow and expensive.

Although H-P could squeeze out a profit on its purchase of EDS just by continuing to cut costs, that won't be enough for H-P to really challenge IBM, its main rival in the IT services business.

To do that, EDS will need to be more "modular," Bendor-Samuel said.

"Customers need to be able to define for themselves what they want to buy," Bendor-Samuel said. "They need to do more plug-and-play and create more flexibility, and that's a very fundamental shift in the psyche of the EDS offerings."

Looking ahead

There are plenty of opportunities.

The economy is in a recession, but many experts say the outsourcing industry tends to do best in slow times.

That's because outsourcing companies such as EDS specialize in taking over a company's tech operations and running them more efficiently at a lower cost.

But Rod Bourgeois, an analyst with Sanford C. Bernstein & Co., wrote in a recent research report that the giant providers such as EDS have to become more nimble to match up with their competitors in India.

Eazor says he understands that EDS has to change.

That's one reason the transition plan he helped devise is being accelerated, he said.

"What I want to bring to EDS is a relentless focus on hitting the long-term objective that we have as fast as possible, which is to be the leader in the IT services industry and to have the performance metrics that support that, which was the whole point of the integration plan," he said.

"We're executing that, and I want to make that happen as fast as feasible."

The sale: Hewlett-Packard Co. bought Plano-based Electronic Data Systems Corp. for $13.9 billion last year.

Top EDS executive: Joe Eazor, senior vice president and general manager. He reports to Ann Livermore, executive vice president of H-P's Technology Solutions Group. Eazor replaced president and chief executive Ron Rittenmeyer as the top EDS executive after Rittenmeyer left at the end of 2008.

The EDS name: For now, EDS retains the official title of "EDS, an H-P company," but some experts predict that H-P will retire the EDS brand in a year or two and simply make it H-P.

Job cuts: H-P originally said it planned to cut 24,600 jobs across both companies after the acquisition and then bumped that number up to 24,700. H-P said in mid-February that it had completed more than 9,000 of those layoffs, but it does not disclose the locations of the cuts or what percentage of the layoffs are scheduled for EDS. Analysts say the majority of the cuts will come from EDS' workforce, which numbered about 140,000 worldwide before the deal.

Pay cuts: H-P has cut salaries companywide since the EDS deal, with reductions ranging from 2.5 percent to 20 percent.

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