Kraft, EDS sign US$1.7B IT services deal

IT infrastructure handed over to outsourcer

Kraft Foods is outsourcing its IT infrastructure — including datacentres, desktop and telco support — to Electronic Data Systems in a seven-year agreement that’s valued at US$1.7 billion.

Approximately 670 Kraft employees will go to work for the Plano, Texas-based EDS.

Mike Klause, global leader for EDS consumer industries and outsourcing, says the company will be responsible for all of Kraft’s IT infrastructure except for applications development. Klause said Kraft also wants EDS to help it innovate.

The transition to EDS is expected to take place in June, he says.

Kraft has been running its own IT operations, but it’s also part of the Altria Group. While it’s been widely reported that Altria is considering spinning Kraft Foods off, a Kraft spokeswoman says the decision to outsource was not done for any reason other than to improve business operations.

“We are taking these actions because we want to be stronger for the long term, and we would do these things regardless [of] whether Altria or somebody else owns our shares,” says Annica Johansson, a spokeswoman for Kraft.

Kraft, which runs a range is systems, is seeking to increase the standardisation of its IT, Klause says. He deferred specific questions about Kraft’s IT operations to the company. Officials there couldn’t immediately provide details. But as far as Kraft’s future IT operations are concerned, EDS does work closely with Microsoft and Dell as part of its Agility Alliance, which develops standardised service offerings.

“We bring a standard environment to them that they can leverage across their entire infrastructure,” says Klause.

Although outsourcing continues to grow year over year, there’s been a trend away from large mega-deals of this size, which have become increasingly rare. Research company Gartner says that in 2005 there were only 11 outsourcing deals in excess of US$1 billion. In 2004 there were 12 such deals, and in 2003, a total of 16.

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