Global Challenges Trigger EDS Spin-Off

To find evidence of what led to the spin-off of Electronic Data Systems Corp. from General Motors Corp. last week, one only needs to review headlines made a year ago this week when IBM Corp. submitted its hostile takeover bid for Lotus Development Corp.

IBM's stunning $3.3 billion cash bid triggered a transaction that would permit IBM Corp. -- EDS' fiercest services rival -- to become owner of Lotus Notes, a groupware technology EDS had already spent millions to incorporate into its services infrastructure.

EDS had installed more than 45,000 Notes desktops on behalf of its largest customer and parent company, General Motors. Upon that base, EDS built its thriving Notes services and consulting business with resources unmatched by any other integrator or service organization in the industry, according to a one-time boastful EDS executive.

For those aware of the strategic impact of the IBM/Lotus deal, it came as little surprise last April when EDS said it would be standardizing its internal operations on Microsoft Corp.'s Exchange Server, a competitor of Lotus' messaging platform.

While an integrator endorsement is always a tasty perk for industry developers, the endorsement from EDS was especially sweet for Microsoft since the integrator was a formidable Notes player. What clearly irked EDS management were the apparent synergies between Lotus' groupware technology and IBM's newly minted global services vision. That vision began to take shape in 1995 when IBM wrested EDS' top slot away and turned the Texas integrator into the world's second largest computer services company.

Finding ways to expand globally is now the greatest challenge facing EDS. When General Motors first bought the integrator 12 years ago, EDS had only a handful of offices overseas.

Today, having wisely leveraged its parent's global infrastructure, EDS is now in 41 countries worldwide. But the marriage of information technologies and telecommunications has called for new strategic partners and not all may be in harmony with EDS' largest customer.