EDS seeks to more than double China workforce http://today.reuters.com/business/NewsArticle.aspx?type=businessIndustry&storyID=2006-06-14T120923Z_01_HKG300903_RTRIDST_0_BUSINESSPROIND-CHINA-EDS-DC.XML
Wed Jun 14, 2006
By Judy Hua and Vinicy Chan
HONG KONG (Reuters) - Electronic Data Systems Corp. (EDS.N: Quote, Profile, Research), the world's largest computer-services firm after International Business Machines Corp. (IBM.N: Quote, Profile, Research), plans to more than double its workforce in China to 2,000 by the end of 2007.
Aided partly by growth in China -- still a small slice of its business -- EDS hopes to expand Asian revenue to more than 10 percent of global turnover in three to five years, from 7 percent last year, through both organic growth and acquisitions.
EDS posted $1.37 billion revenue in Asia last year. Less than 20 percent of that came from China, where it will employ less than 1,000 by the end of this year.
The company, which has invested $50 million in China over the past three years, will spend "much more" over the next two years in the country, Joe Eazor, the company's Asia president and China chairman, told Reuters in an interview on Wednesday.
But while China would be one of EDS' growth engines, Eazor warned that competition was intensifying as global software firms jumped on the bandwagon. The country's regulatory framework and level of development also posed difficulties.
"Even though China is one of the least developed and it is huge in terms of revenue opportunities, it is going to be one of the most competitive markets because everyone is investing," Eazor said after signing a software design contract with Fubon Bank (Hong Kong) Ltd. (0636.HK: Quote, Profile, Research).
The Shanghai-based executive said the company expected to more than double its workforce to around 2,000 employees.
Plano, Texas-based EDS is also looking to spur growth through buying companies, mainly in China -- where General Motors Corp. (GM.N: Quote, Profile, Research) is one of its biggest clients -- India, Japan and South Korea, over the next few years.
"Our targets are still mid-to-large corporations in Asia," he said, citing the banking and insurance sectors.
TOOTH-AND-NAIL
Another challenge was that Chinese firms tended to spend more on products than services -- a feature of immature markets, Eazor said.
Most of the world's major offshore designers, including Infosys Technologies Ltd. (INFY.BO: Quote, Profile, Research) and Tata Consultancy Services (TCS.BO: Quote, Profile, Research), are expanding in China, taking advantage of an abundance of software engineers and lower labor costs.
The pair of Indian giants compete in China with a number of U.S. multinationals, including BearingPoint Inc. (BE.N: Quote, Profile, Research), Hewlett-Packard Co. (HPQ.N: Quote, Profile, Research) and International Business Machines(IBM.N: Quote, Profile, Research).
Tata Consultancy Services said on Wednesday it expects its Chinese outsourcing venture with Microsoft Corp. (MSFT.O: Quote, Profile, Research) to kick off in July and help it snag government deals, boosting revenue as it steps up a global acquisitions hunt.
Tata is moving into China in part to support the local and Asia-based operations of many of its customers, including the likes of Motorola Inc. (MOT.N: Quote, Profile, Research) and General Electric Co. (GE.N: Quote, Profile, Research), as well as Chinese-speaking customers in Taiwan and Hong Kong.
China's software export market is worth about $1 billion versus India's $12.5 billion, but is growing rapidly as design houses look to diversify from India and serve a growing base of multinational clients with major locally based operations.
EDS, founded by former U.S. presidential contender Ross Perot, delivers information technology and business process outsourcing services to clients in the financial, manufacturing, retail and government sectors.
It was awarded a three-year U.S. Navy contract extension worth about $3 billion in March to continue work on an agency communications network. But Eazor said the company's close relationship with the U.S. government was unlikely to have much of a negative impact on its business in China because IBM and other rivals also had a close relationship with Washington.
"To be honest, it has not been that direct," he said. "Most of our competitors are facing the same hurdle."
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