Electronic Data Systems Corp has become the latest IT services vendor to stake its future on nurturing dot com talent, with the announcement that it is to set up a new $1.5bn global e-business fund.
Plano, Texas based EDS will invest half the seed money in EDS-AT Kearney Ventures over the next five years with the other half coming from private equity funds and clients. Although unnamed, initial participants will include 12 Fortune 500 companies from diverse industries such as financial services, utilities, telecommunications and retail.
The fund, which the company says will be one of the largest of its kind, will allow EDS to take equity stakes in web-based consulting or alliance partners. EDS named Atlanta-based business-to-business e-procurement portal Tradex Technologies (which was acquired by Ariba Inc last Friday) and a new net market subsidiary of its own, EDS CoNext, as the first beneficiaries.
The move could give a significant boost to EDS’ $1bn-plus E.solutions unit, according to Ross Jobber, IT services analyst at Deutsche Bank, London. He expects that investing in new talent in this way will help give EDS the armament to compete with dynamic new media consultancies like Razorfish or Framfab. This will allow it to leverage the high profitability of e-business services to overcome the problem of matching revenue growth to staff growth that many services companies experience. By allying itself closely with what are perceived as cutting edge technologies Jobber also expects EDS’ own stock market appeal to rise.
EDS is only the latest services vendor to become involved in building up web-based start-ups. Last week, Andersen Consulting announced the launch of its own $1bn fund, while the week before struggling consulting and systems integration house Cambridge Technology Partners set up its own dot com incubator. These three join a growing list that also includes web consultancy Scient and Big Five accounting firm KPMG.
EDS-AT Kearney Ventures will have offices in Texas, California, New York City and London, UK. It is to be headed by Rick deNay, currently EDS senior vice president of corporate strategy and development, and David Asper, a vice president of EDS’ management consulting arm AT Kearney.
