Saber deal adds muscle to EDS

EDS Corp.'s acquisition of Saber Corp. in November
was one of the largest state and local acquisitions
in recent years and is comparable to other market-changing

Affiliated Computer Services Inc. vaulted into the
top ranks of state and local integrators in 2001
when it bought Lockheed Martin IMS for $825 million.

And Northrop Grumman Corp. substantially
boosted its state and local sales through the acquisition
of TRW Inc. the following year for $7.8 billion.

In some respects, EDS' purchase of Saber recalls
CGI Group Inc.'s acquisition of Fairfax, Va.-based
AMS Inc., said Rishi Sood, a research vice president
at Gartner Inc. CGI bought AMS' commercial
and nondefense U.S. government work in a deal
valued at about $443 million, and CACI
International Inc. purchased AMS' defense and
intelligence assets for about $415 million.

"CGI established itself with a key beachhead to
get [information technology] outsourcing in the U.S.
state and local market," Sood said. "They are now
bidding on these deals."

In a similar turn, the Saber acquisition will give
EDS a strong presence in the human services sector,
he said.

The Portland, Ore., company has extensive experience
integrating systems for eligibility; workforce;
and child support, care and welfare programs. The
acquisition will let EDS not only handle transaction
processing but also compete for modernization projects,
Sood said.

"It's a great example of what two vendors can do
to broaden their footprint in the [state and local]
marketplace," he added.

EDS' business apart from the health care market
previously consisted of tax and revenue and criminal
justice offerings, and Saber targets agencies
and programs that receive federal funding, such as
motor vehicle departments, elections, public retirement
and unemployment insurance, said Nitin
Khanna, chief executive officer of Saber
Government Solutions.

When the companies combine EDS' state and
local business with the Saber business, "we actually
get more lines of business without any overlap,"
Khanna said.

Having a parent company with deep pockets will
help the new Saber unit take on projects it previously
shied away from either because the financial
requirements were too great or it did not have business
process outsourcing capabilities.

"Saber was leaving a lot of money on the table in
terms of hosting," Khanna said. "We now have the
opportunity to be able to bring all of the services
and solutions that EDS has to offer to Saber customers
as well."

About the Author

William Welsh is a freelance writer covering IT and defense technology.

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