Rolls-Royce outsources to EDS in 12-year £1.3bn deal

Nick Huber

The trend for mega outsourcing deals gained fresh momentum last week after Rolls-Royce announced a 12-year $2.1bn (£1.3bn)...

Nick Huber

The trend for mega outsourcing deals gained fresh momentum last week after Rolls-Royce announced a 12-year $2.1bn (£1.3bn) outsourcing contract with EDS.

The deal extends an existing outsourcing relationship and between the two companies and covers Rolls-Royce's global aerospace, defence, marine and energy group. EDS will run Rolls-Royce's IT infrastructure, e-business solutions and supply chain management, under the new deal.

The services giant will receive an incremental revenue of $1.7m through the contract.

An ambitious plan to develop a series of Web portals to streamline the supply chain and customer relationship management is at the heart of the deal. In partnership with Rolls-Royce business managers, EDS will develop three Web-based portals for employees, suppliers and customers, worth tens of millions of pounds.

Rolls-Royce will use the portals - to be developed over the next year - to take orders for spare parts in real-time over the Internet, with reference to an online inventory. EDS will also provide business consulting and application service provision offerings under the new deal.

The contract comes in the wake of a 10-year outsourcing deal between the Bank of Scotland and IBM, which was announced last month. And EDS president for Europe, the Middle East and Africa, John Meyer, hailed the deal as a sign that the UK outsourcing market is taking off after the Y2K-related drop in demand.

However, IT managers and industry analysts are split down the middle over the merits of 10-year-plus large-scale outsourcing contracts. Industry experts have argued that these long-term contracts lack the flexibility to change with the evolving technology and business needs of the client.

Meyer stressed that most outsourcing contracts had an agreed "termination" get-out clause, to reflect the supplier's investment in the client's IT systems. Rolls-Royce will also retain control for their overall IT strategy, he added.

EDS is already responsible for Rolls-Royce's IT infrastructure, network, systems, applications and end-user support.

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