Let the good times roll

Let the good times roll - A HostingTech Q&A with EDS CEO Dick Brown

Dick Brown, the chief executive officer at EDS (www.eds.com; Plano, Texas), is credited with dismantling complacency and re-energizing the 140,000-strong EDS work force. Within three years, he has propelled EDS into a future in which hardly a week goes by without yet another coup in service contracts, some accounting for billions of dollars in new business from such heavyweight clients as the U.S. Navy, Air Force, and the Marine Corps.
Yes, EDS is kicking butt, and Brown tells how he did it.

HostingTech: What drives EDS?
Dick Brown: We are determined to regain leadership in the I.T. services industry, which we pioneered nearly 40 years ago. We’ll do this by being the undisputed leader in quality of service.

HT: What corporate culture changes have occurred at EDS since your arrival?
DB: EDS’ new corporate culture emphasizes action, accountability, and collaboration. Operating mechanisms have been put in place to continuously reinforce these attributes throughout the worldwide EDS team. Timely, unfiltered communication is critical to our operations. Every 14 days, I send an e-mail to every member of the EDS team. This helps ensure that everyone is fully informed of the state of our business at all times. Even more valuable is the candid response I receive from employees.

HT: How has your business style trickled down to individual operating departments?
DB: Every person at EDS has been challenged to be better than their counterparts at competing companies. Action changes a business. Speed, accountability, collaboration, service excellence, and continuous improvement are embedded in everything we do … Three words describe EDS: action, urgency, and excellence.

HT: Have you rewritten the EDS mission statement, either in letter or in spirit?
DB: We redid our vision statement in 1999 to put a constant spotlight on providing superior value to clients and service excellence. Our vision puts the client at the center of everything we do.

HT: Discuss the degree of change that has occurred at EDS, in terms of corporate focus and core business direction, since your arrival.
DB: We retooled our operations from 48 strategic business units to five global lines of business, to be market-driven and client-facing. In our business model, 80 percent of our people touch the client directly. We’ve sharpened accountability, erased needless layers to speed up decision-making, and dedicated ourselves to delivering the best client service in the industry. Our relentless pursuit of cost savings and productivity improvements enabled us to remove more than $2 billion from our cost structure since 1999 … there’s still a lot of work to be done.

HT: What segments of EDS’ business are the hottest right now?
DB: Clearly, information technology services are the place to be in this economy. Leading companies and governments around the world look to EDS to help them realize the full value of information technology. We see significant opportunities in strategic infrastructure, business process outsourcing — particularly in shared services like human resources and payroll — digital supply chain, enterprise application integration, and operations consulting. Since September 11, we’ve also seen a doubling of inquiries on information security, business continuity planning, and emergency recovery services. We are not technology in search of an application; we are solutions architects, innovatively applying technology. This enables us to keep anticipating changes in the marketplace.

HT: What has been the growth of those segments in the last 6 to 12 months?
DB: Third quarter 2001 marked our eleventh consecutive quarterly record for contract signings. We again reported double-digit base organic revenue growth across business segments and geographic regions. Information Solutions, our strategic infrastructure business, achieved its third consecutive quarter of 20 percent or better organic growth. E Solutions, our solutions consulting business, exceeded the market rate of growth for the seventh consecutive quarter.

HT: How will EDS’ business strategy change in the next two to three years?
DB: Our fundamental strategy will not change. We committed to achieving base revenue growth greater than the market’s growth, earnings-per-share growth greater than total revenue growth, and an operating margin run rate of 10 percent or better. We’ve delivered on these financial commitments. In fact, we achieved our double-digit operating margin performance goal a full quarter ahead of scheduling, reaching 10.1 percent on a trailing four-quarter basis in quarter three. Our challenge is to keep moving faster than the market and our competitors. We will continue to focus our resources on fast growing areas like information security, strategic infrastructure, business process outsourcing, mobility, customer relationship management, supply chain management, and, of course, managed hosting.

HT: What significant bumps are being forecast for EDS’ core businesses in the next 12 months, and what will be the major obstacles to profitability in each unit?
DB: EDS is strong, balanced, and sufficiently diverse to absorb any near-term weakness in a given business segment or single account without a negative impact to our overall results. The recent softness we’ve seen in A.T. Kearney (the management consulting subsidiary) and GM are due to temporary market conditions, and we remain optimistic about the performance of these units in the longer term.

HT: How does EDS differentiate itself from competitors in the high-end services marketplace?
DB: Our commitment to service excellence is a key differentiator. We conceived of, and developed, our Service Excellence Dashboard, a Web-enabled tool that enables us to monitor our performance in delivering services to clients in real-time. Performance metrics on clients representing more than 90 percent of EDS’ revenues are available to EDS leaders around the world, around the clock. Consistently, less than 1 percent of clients on the dashboard have been in the red [indicating pending customer issues] … We view the Dashboard as a competitive advantage.

HT: What is the value proposition of EDS for enterprise-class customers?
DB: Clients buy from us in good times to accelerate growth and gain market share, and in challenging economic times to reduce costs and become more efficient. Our value proposition is compelling in any economy. We leverage our scale and scope to save our clients at least 20 percent of their I.T. budgets. We can do it better and more cost-effectively, enabling clients to focus on their strategic business operations.

HT: How have benchmarks of customer satisfaction differed in the last 24 months?
DB: The key difference is the priority placed on speed. A business that isn’t fast isn’t good. Our clients and our clients’ customers have an expectation of consistent, reliable delivery, at Internet speed.

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