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What's EDS's e-commerce plan?

Analysts note the striking similarities between EDS's strategy and that of first-place rival IBM Global Services.

Dusting off its legacy image with a new unit focused on Internet services and a strategy that sounds suspiciously like that of rival IBM Global Services, could a zippy new advertising campaign for EDS e-Business Solutions be next?

In a meeting with analysts last week, CEO Dick Brown maintained the company's e-commerce strategy is no copycat. Yet analysts begged to differ, noting the striking similarities between EDS's plan, which was sketched out this week--in the wake of layoffs and cutbacks at the company--and that of first-place rival IBM Global Services.

"It's metoo.com," said Julie Giera, analyst at Giga Information Group in Cambridge, Massachusetts. "They're late to the party and restructuring and reorganization will cause them to be later."

Nonetheless, analysts say with some 115,000 employees, after the layoffs, decades of systems integration experience, a huge installed customer base, and $16.9 billion in 1998 revenues, EDS will be a force to be reckoned with in the e-commerce market. Indeed, EDS is assigning about 20,000 employees from different business units to e-Business Solutions and estimates its revenues in 1999 will top $2 billion.

EDS also expects to see e-business shift from representing just 12 percent of the firm's business in 1998, to about 70 percent of business next year, with 29 percent coming from IT services and 1 percent from consulting. Brown said he is also counting on e-business to help drive overall revenue growth in the coming year to 14 to 16 percent.

Like IBM, which folded its management consulting arm into IBM Global Services to form one business that provides everything from strategic consulting to systems integration to management, EDS is pulling its A.T. Kearney management consulting unit closer to e-Business Solutions. In 1995, A.T. Kearney joined EDS as a wholly owned, separate subsidiary, though the firm that still runs under the A.T. Kearney name, with its own management board and board of directors

Meanwhile, EDS has yet to detail what role Systemhouse, the consulting arm of MCI WorldCom that EDS bought in February, will play in the new unit, though analysts noted that EDS didn't really have a plan for Systemhouse at the time the deal was made and is now struggling to map that out.

"You'd expect EDS to bring A.T Kearney back in and position it as IBM has with [its consulting group within] global services," said Tom Rodenhauser, president of Consulting Information Services in Keane, New Hampshire, who publishes a monthly report on the management consulting industry. Rodenhauser noted that A.T. Kearney has done little to boost EDS's profile, to date, posting disappointing first-quarter revenues.

And though A.T. Kearney does provide high-margin management consulting services, the firm has limited experience in advising clients on e-commerce strategies, Rodenhauser added. He also questioned whether EDS has the depth of relationship with its outsourcing customers to move to the next step: high-level Web projects.

Though EDS is one of the top IT services market players along with IBM, CSC, and Andersen Consulting, the firm will have a tough time being nimble, attracting e-commerce talent, and competing against smaller, focused Internet services firms, said Tyler Mayfield, senior analyst at Dataquest in Mountain View, California.

"They do have a very formidable challenge--as does any large organization moving into the electronic commerce space, particularly someone as large and as bureaucratic as EDS," he said. "The challenge is weeding out the EDI (electronic data interchange) of yesteryear and weeding out Web page development and really getting into the core of what e-business is--the business-to-business transaction, online procurement, sharing of value chains, and leveraging of partners."

"Going and doing data centers for the [federal government] and doing electronic commerce implementations are two completely different beasts that require two completely different business models and different sets of talents," he said.

Meanwhile, analysts note that IBM has been particularly good at marketing the IBM brand and positioning the company as an e-commerce pioneer. IBM Global Services, which grew about 20 percent last quarter, compared to EDS's growth of about 9 percent, has completed about 18,000 e-commerce projects since the firm announced its first group of services in 1997.

Corporate spokeswoman Jan Walbridge said EDS isn't the first company to copy IBM's trademarked e-business solutions name.

"We don't pay attention to it," she said. "It's out there and we're kind of flattered."