EDS has come through a difficult few years, after problems at some of its largest customers hit the company’s profits. But the appointment of a new chief executive in 2003, Michael Jordan, has helped to turn the firm around.

As one of the largest suppliers of technology services and outsourcing to the UK government, the vendor is involved with some of the biggest and highest-profile projects in the country – and also one or two that critics would put under the banner of government computer problems, such as Tax Credits and the Child Support Agency.

Computing talked exclusively to Bill Thomas, EDS vice president and general manager for Europe, Middle East and Africa, about the challenges of transforming government IT, and the future of outsourcing.

Q: Whitehall IT is often unfairly portrayed as being dominated by problems. How do you see the state of technology in government?

I look at public sector IT, and there are big successes and there are big problems. The government deserves a lot more credit for the ambition it is showing. In Europe, the UK sets the standard for really wishing to make massive changes in process for delivering services to citizens. The government set the bar very high, in terms of immensely ambitious programmes, and because the bar is high it sometimes struggles to reach it. But I would rather have a government that is committed to re-engineering public services, to driving up productivity, and to taking that money and invest it somewhere we want it to go. I’d rather that than some other places where IT is a necessary evil used for data processing and nothing else, and it’s a much less aggressive agenda being pursued.

Q: There is undoubtedly room for improvement though – what needs to be done?

There are bits of any organisation that are good at what it does, and bits that are not as good. The challenge for us all is to be as good everywhere as we are somewhere, sometimes. If you look at the government, there are places that understand that the IT project is just the tip of the iceberg. The biggest part is about re-engineering processes, change management, re-skilling, leadership. Every place where I have seen IT applied to make a radical improvement and change to a business, whether private or public sector, the one thing they have in common is excellent leadership.

One of the biggest things about whether these projects succeed or fail is that you really have to have a business-led programme. The great paradox for IT is that you have to give leadership away to the people that run the business, they have to lead these programmes. And they are getting better. The Office of Government Commerce has done a good job in understanding and preaching best practice. The UK has come a long way in raising the game and executing IT-enabled change right across the patch, but there are still problems. The challenge for the UK public sector is to be as good everywhere as it is in some places.

Q: Increasingly, the biggest challenges faced by government technology projects are to do with process and cultural change. How can IT help with that?

Look at the Joint Personnel Administration (JPA) programme that has just gone live in the armed forces. We have supported Afpa, the agency that runs the payroll function for the military, for seven or eight years. That was initially not about changing the business process but re-platforming and re-running those systems and we drove massive cost out of the operation. But it still left the military with three separate pay and personnel systems for the Army, Navy and the RAF.

That has two problems – if you are serving in the Army in Basra next to someone from the air force and you’re paid in a different way, that is operationally bad. They want consistency in how you manage people. Plus, it’s a wholly inefficient way to run a human resources system. So we have worked with the military for about three years on an IT-enabled business change programme to create a system to serve the Army, Navy and air force. The first to go live was the RAF a few months ago.

That’s an immensely ambitious programme, and the leadership in the Ministry of Defence (MoD) has been exemplary. For years we used to talk to the MoD about doing this, and they said it’s an IT system so you get on with it. That is never going to succeed. You need the people at the top to lead it if they want to do it. They had to get generals and air marshals and admirals to agree to change the rules on how you pay people, which go back in some cases hundreds of years. That’s a significant event. And they’ve done that, and gone live. There are teething troubles, which you always get, but we really should look to the MoD and say you showed leadership in terms of shared services, there is a huge benefit, and we’re going to need the same to see this change programme through.

Q: Are other parts of government taking note of these successes?

There is definitely more that can be done for other parts of government to learn from that sort of example. You look at the challenges of the Treasury’s Comprehensive Spending Review - most departments will have aggressive productivity targets to meet. If you talk to people in major banks for example, you know the way banks have achieved major productivity over the last 10 years is through IT-enabled business change. So the government has to get this right. I give 10 out of 10 for stepping up to the challenge, but the real trick is to learn from across Whitehall and apply the lessons so they do get the users involved, and manage the programme as a business-led thing. Industry has a role to play, we have to execute well, but if we do that together we will have a lot more programmes like JPA.

Q: In the private sector, large companies are increasingly moving away from traditional mega-deals with single outsourcers. What challenges does that present for EDS?

The optimal solution for one client will not be the same for another, partly because of the maturity of the organisation in managing those new relationships. It might make perfect sense for one firm to divide up a contract, but someone has to be the prime systems integrator. If you are world class at being a systems integrator, such as BP, then that might be the least risk and best value approach. If you are a different kind of firm with different priorities, then you might want more of that systems integrator capability to be provided for you.

Where we are involved in multivendor environments, there is still a function for service integration. What we have to do is not sulk, and say we don’t want to play with anyone else, which has been something in EDS. Go back five or six years, and the way we worked with our technology suppliers was not good – EDS were not necessarily nice people to be selling technology to. We had to do some serious change management inside EDS to get people to invite our partners in. We have systems architects who have spent 20 years in the industry and quite like designing their own solutions, and then like asking vendors to quote against it. That is not what this is about. All our technology partners now have access to our strategic sales centre, helping to create a solution. We had to learn to play nicely with other children, and it’s the same on the multivendor contracts.

The Defence Information Infrastructure (DII) contract is a big consortium led by EDS, we’ve seen that before, but DII has been put together to have no single point of failure. They designed a consortium where, if anyone drops out for any reason, there is someone else there able to pick the work up. There is an inherent robustness in that consortium. We have learned over the last few years and better ways to do that.

Q: How have attitudes to offshore outsourcing changed in recent years?

In the commercial sector, I can’t remember the last time we put a bid out that didn’t involve some form of offshoring. More and more public sector bids are the same now as well. More people are procuring for specific outcomes rather than specifying how the inputs should work. The UK is far less protectionist than the US in that respect. It is about free trade and comparative advantage. The Indians and to a lesser extent the Chinese, have created a comparative advantage, and that is a wonderful thing.

If you believe in free trade and that comparative advantage creates wealth for the whole of society, then that is a wonderful thing. If you look at the collapse of Rover last year, that was a painful economic shock for the Midlands, but the vast majority of people have been absorbed into the economy because firms are willing to hire people because there is flexibility in UK employment laws.

Q: But the government still seems to be cautious about offshoring because of the political implication of civil service jobs going overseas?

Suppose you are implementing an HR system for a government department. Twenty years ago, you would have used Cobol and designed and coded and tested a system, all in the UK, probably in the same building. Today you would just buy a package, and configure it with the client. The package is probably produced in California – have we outsourced those jobs to California? You may have heard the phrase creative destruction – the jobs we had 20 years ago are gone, replaced by other jobs. Jobs now that go offshore will just be replaced. We should be interested as a country in the skills agenda; is the UK a good place to do business and do we have the right infrastructure to make it a good place for those jobs to be placed? If we can get it right we should have no fear about offshoring.

If you really want to save jobs, go and burn down JCB’s factories so you don’t have earth movers and everyone can use picks and shovels – then there would be a lot more jobs.

Q: Finally, what has been the key to EDS's turnaround in the past three years?

When Michael Jordan came in we had a very poor cash position, our balance sheet was much weakened by the investments we had to make in the NMCI contract with the US Navy, so the first thing Mike did was fix the balance sheet. We managed the business for cash, we reigned in, we made certain disposals. Now we have probably the strongest balance sheet in the industry, with $3-4bn of liquidity. It was key to get into a strong financial position to do transactions, that was the first stage.

What was smart was that Mike took our new strategy to Wall Street. Some 65 per cent of EDS is in the hands of less than a dozen firms, so Mike was able to talk to them about our strategy and sell the long term value of that. Quarterly earnings are still very important to EDS, but Mike bought us time to execute, the two or three years to invest in that strategy, start to migrate our accounts, fix our cost models, become competitive again, get sales growing, and embed that strategy.