Outsource non-core IT, says EDS chief

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Outsource non-core IT, says EDS chief

Dick Brown, chief executive officer of Electronic Data Systems, said it is time for enterprises to outsource their non-core IT activities.

Brown said too many companies spend too much - between 75% and 95% of their annual IT budgets - on "supporting the status quo to just boot up their business every day".

Much of that investment is spent on architecture, on systems that are underused or cannot be easily tweaked to cope with business changes.

Aware that some companies are not prepared to hand over their IT assets, Brown suggested business process outsourcing (BPO), an IT service whose popularity and acceptance have been growing. EDS is already providing BPO services to General Motors.

Brown said he expected BPO to become a $100bn (£60.7bn) business over the years. Outsourcers would be able to manage not only IT systems, but also entire business operations, such as payroll processing and inventory management.

However, Brown said labour laws and other regulations in some European countries, such as Germany, can make outsourcing difficult. "Everyone is talking about how to manage costs during the current economic downturn."

How German companies will contribute to the take-up of that service or any of the other EDS outsourcing services remains to seen. Many have been reluctant to outsource much, if any, of their IT activities.

"We view our IT infrastructure as absolutely essential to our core car manufacturing business," Klaus Hardy Mühleck, chief information officer of Audi.

"Although we may want to outsource some processes or do some selective out-tasking, we need to manage our core IT activities ourselves."

Mühleck said Audi "is best in class when it comes to costs", with IT costs accounting for 1% of revenue.

In December Deutsche Bank signed a large outsourcing deal with IBM.

"Many companies are talking about the need to lower their costs and improve their business processes," said Hermann-Josef Lamberti, chief information officer at Deutsche Bank. "I'm not about to speak for others but I believe outsourcing is one way of achieving this."

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