EDS is the latest company aiming to capture a slice of the lucrative niche, widely perceived as the next big thing on the Internet. The information technology services firm today announced it is setting up a venture fund with as much as $1.5 billion for business-to-business (B2B) investments.
The EDS-A.T. Kearney Ventures fund will focus its investments on Internet and B2B companies over five years, taking equity stakes in its Internet-based clients.
"EDS sees the need for innovative services and opportunities to be developed to help further its own offerings and to better serve its clients," Dick Brown, chief executive at EDS, said in a statement. "The fund will foster the development of these services."
The move comes on the heels of rival consulting firms setting up similar venture funds. Earlier this week, Andersen Consulting set up a new unit, Andersen Consulting Ventures, with plans to invest up to $1 billion over the next five years to create similar Internet businesses. And last week, Cambridge Technology Partners announced plans to incubate start-ups in return for a cut of their public offerings.
The larger services and consulting firms, facing competition from smaller firms like Scient, Viant and Razorfish, have been slowly shifting their focus from traditional back-end implementation and consulting projects to profitable Internet-driven projects.
Internet venture firm CMGI earlier this week encroached on the role of services and consulting firms by creating a subsidiary, CMGI Solutions, to help companies take their businesses online.
With services and consulting firms setting up venture funds, and pure venture capitalists also shifting their focus to B2B opportunities, the outlook for many seedling B2B companies is quite rosy.
The first companies to win the support of EDS' new fund are EDS CoNext and Tradex Technologies. EDS plans to fund the ventures with half of the necessary seed money over the next five years, with the other half coming from clients and select private equity funds.
Separately, Ariba, which operates a Web-based transaction service for corporate purchasers, announced yesterday its agreement to acquire Tradex in a stock deal valued at $1.65 billion. Closely held, Atlanta-based Tradex matches large numbers of buyers and sellers online.
The fund will be co-headed by Rick deNey, currently senior vice president at EDS for corporate strategy and development, and by David Asper, an A.T. Kearney vice president.
The unit will have offices in Plano, Texas; Menlo Park, Calif.; New York and London.