Saber deal adds muscle to EDS

EDS Corp.'s acquisition of Saber Corp. in Novemberwas one of the largest state and local acquisitionsin recent years and is comparable to other market-changingacquisitions.Affiliated Computer Services Inc. vaulted into thetop ranks of state and local integrators in 2001when it bought Lockheed Martin IMS for $825 million.And Northrop Grumman Corp. substantiallyboosted its state and local sales through the acquisitionof TRW Inc. the following year for $7.8 billion.In some respects, EDS' purchase of Saber recallsCGI Group Inc.'s acquisition of Fairfax, Va.-basedAMS Inc., said Rishi Sood, a research vice presidentat Gartner Inc. CGI bought AMS' commercialand nondefense U.S. government work in a dealvalued at about $443 million, and CACIInternational Inc. purchased AMS' defense andintelligence assets for about $415 million."CGI established itself with a key beachhead toget [information technology] outsourcing in the U.S.state and local market," Sood said. "They are nowbidding on these deals."In a similar turn, the Saber acquisition will giveEDS a strong presence in the human services sector,he said.The Portland, Ore., company has extensive experienceintegrating systems for eligibility; workforce;and child support, care and welfare programs. Theacquisition will let EDS not only handle transactionprocessing but also compete for modernization projects,Sood said."It's a great example of what two vendors can doto broaden their footprint in the [state and local]marketplace," he added.EDS' business apart from the health care marketpreviously consisted of tax and revenue and criminaljustice offerings, and Saber targets agenciesand programs that receive federal funding, such asmotor vehicle departments, elections, public retirementand unemployment insurance, said NitinKhanna, chief executive officer of SaberGovernment Solutions.When the companies combine EDS' state andlocal business with the Saber business, "we actuallyget more lines of business without any overlap,"Khanna said.Having a parent company with deep pockets willhelp the new Saber unit take on projects it previouslyshied away from either because the financialrequirements were too great or it did not have businessprocess outsourcing capabilities."Saber was leaving a lot of money on the table interms of hosting," Khanna said. "We now have theopportunity to be able to bring all of the servicesand solutions that EDS has to offer to Saber customersas well."