EDS out by itself in chase for biggest deal of the year

By PETER GRIFFIN AND ADAM GIFFORD

EDS is now second to none in the running for the biggest IT outsourcing deal of the year after dairy giant Fonterra crossed Hewlett-Packard off its list.

While Fonterra is still evaluating whether to outsource all its IT and telecoms requirements, EDS appears to be just a few months away from picking up a multi-year deal estimated to be worth up to $800 million.

EDS managing director Rick Ellis said the final stage of negotiations was a "critical period" for the company.

HP services manager Simon Tong said that, despite losing the bid, just making the shortlist had boosted HP's business in New Zealand.

"If you go back 12 months, I don't think HP would have been considered a tier-one outsource option, so the fact we got down to the final two in what Fonterra said was a close-run race is a huge step forward," he said.

HP had teamed with Unisys and global network services provider Equant in putting together its bid.

Tong said HP expected to continue to be an important supplier of equipment and expertise to Fonterra.

"They have lots of Alphas, lots of Proliants, lots of HP midrange servers and desktops," he said.

The outsourcing deal could include all desktop and laptop support, voice and data network management, helpdesk services, email systems and 1000 utility and application servers.

Fonterra runs a wide range of applications, including the Oracle systems used in the manufacturing business, and the SAP supply chain management and financial software now being rolled out.

Many of Fonterra's unique processes such as collection of milk and payment of farmers, as well as the www.Fencepost.com internet portal, are captured by custom software written in Jade.

Ellis said EDS had been able to prove it could support Fonterra's existing systems and chart an upgrade path for them.

He was reluctant to speculate about how winning the Fonterra outsourcing tender would change the scope of the EDS business in New Zealand.

Should Fonterra green-light its outsourcing plan, EDS is likely to take on a substantial portion of the dairy giant's IT staff, as EDS did when it signed off the deal with Telecom.

EDS outmanoeuvred rival IBM to win that $1.5 billion deal in 1999, calling in EDS chief Dick Brown at the critical stage of negotiations.

EDS' willingness to allow Telecom to take a stake in EDS New Zealand is understood to have played a key part in clinching the deal.

Telecom last year sold its 10 per cent stake in EDS back to the company for $46 million.

No such shareholding arrangement is believed to be on the cards in the Fonterra deal.