EDS Discontinues P&G ITS Outsourcing Talks

Discussion
Jul 02, 2002
George Anderson

EDS Corp. ended talks with Procter & Gamble Co. related to a potential contract worth upward of $10 billion, Reuters reports. P&G will continue to pursue a partner to handle most of its business services on an outsourcing basis, according to Terry Loftus, P&G spokesman.

The decision to terminate discussions was made after the two companies could not agree on a price for EDS to buy P&G’s existing business services division, according to EDS. The division, which includes between 5,700 and 7,000 employees, was set up to run P&G’s business processes such as human resources, finance, benefits and pensions.

“It would require significant up-front investment from EDS to acquire P&G’s business process outsourcing capabilities and develop them further,” Jeff Baum, an EDS spokesperson says. “We believe the risk profile was simply too high.” EDS concurrently says its full-year 2002 operating earnings could miss expectations if struggling WorldCom Group fails to pay its bills.

Moderator Comment: Will other large CPG and retail businesses follow P&G’s outsourcing lead?

Probably, although we’re not sure we see the wisdom in a move that may not lead to either lower costs or higher effectiveness in the company’s business services. [George Anderson – Moderator]

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