IMA ED
UCATIONAL CASE JOURNAL VOL. 2, NO. 3, ART. 2 SEPTEMBER 2009
1
Introduction
In the period 1999-2001, Dick Brown posted spectacular results as the CEO and chairman of EDS (Electronic Data Services) Corporation. In 2002, Bossidy and Charan used Brown’s success at EDS to illustrate how to properly execute a turnaround strategy in their bestselling business book, Execution: The Discipline of Getting Things Done. Surprisingly, just over a year after the book was published, Brown was unceremoniously dumped by the board of EDS. Many inside and outside of EDS were left scratching their heads, wondering how Brown, a highly profiled corporate turnaround star, fell so far, so quickly. Was Brown just unlucky to be caught in the wake of the economic downturn that followed the terrorist attacks of September, 11, 2001, or were EDS’ issues more systemic?
EDS: The Com pan yi
With revenues of $21 billion in 2003, EDS was one of the largest players in the $140 billion IT outsourcing market. EDS delivered infrastructure services (running mainframe and desktop services), application services (developing and operating software applications), and business process outsourcing services (handling payments/bills and operating help desks), to clients in the manufacturing, financial services, healthcare, communications, energy, transportation, and consumer and retail industries, as well as to governments around the world. In 2003, EDS’ 130,000 employees:
• Supported 3 million desktops in 60 countries,
• Operated more than 50,000 servers in 15 service management centers, more than 250 contact centers, and more than 94 application solution centers around the world, and
• Managed 350 million-plus customer relationships and more than 2 billion customer interactions in 41 languages.
While the IT outsourcing market was growing as more firms outsourced their IT operations and business processes, it was highly competitive. In the infrastructure services market, EDS’ main competitors were IBM, Computer Sciences Corporation (CSC), HP, Unisys, and Fujitsu. In the application services market, its main competitors were IBM, Accenture, Bearing Point, Cap Gemini Ernst & Young, Deloitte Consulting, and CSC. In the business process outsourcing market, EDS faced competition from Accenture, Affiliated Computer Services, Convergys, Fiserv, and Concord EFS. EDS also faced increasing competition from offshore IT outsourcing firms, such as India’s Wipro, which paid lower taxes and drew from a well-educated, multilingual workforce willing to work for lower wages.
EDS, a pioneer in the IT outsourcing industry, was founded by former U.S. presidential candidate Ross Perot in 1962. Perot later sold the company to General Motors in 1984 and by the time GM had spun EDS off as a separate entity in 1996, its profits were down, revenues were flat, and it had missed the start of the e-commerce revolution. By the end of 1998, EDS was suffering from a number of ailments including indecisiveness, poor accountability, and an organizational structure that did not fit its environment.1 Many industry observers felt that EDS needed a shake-up.2
ISSN 1940-204X
Turnaround and Down with Richard Brown: EDS 1999-2003