The ultimate success of EDS (NZ)’s controversial funding from Investment New Zealand two years ago is still dependent on the continued strength of the New Zealand company, its local head, Rick Ellis, acknowledges.
The job-creation set in motion by the partnership funding is set fair to help the New Zealand IT industry as a whole with a skills infusion, argue Ellis and economic development minister Jim Anderton. So far, the arrangement is keeping up with its milestones, and Ellis and Anderton last week trumpeted the achievement to media people in the Beehive.
The promised 200 jobs (actually 207) have been created in the first 15 months directly as a result of the scheme, which comes under EDS’s “Best Shore” program. EDS thus gets a first-instalment payout of “200 over 350 times $1.5m, whatever that is,” Anderton says - $1.5m being the total grant and 350 jobs the eventual target – set to be reached by March 2006.
But the positive figures — taking people off the benefit, creating skills, getting New Zealanders work on overseas projects and bringing overseas skilled people into the country — would disappear if EDS New Zealand hit a bad patch, Ellis says.
Fortunately, after the shock of a $56m extraordinary “revenue adjustment” from a change of accounting standards driving the company into a formal loss position in 2002, and a massive $95m hit from similar sources this year doing the same, the underlying trading position is sound, and those extraordinary items will no longer be on the ledger for 2004, he says.
Anderton dismisses the extraordinary items as “a paper redistribution that we [government] were aware of. Having got through that, we’ll be looking to [EDS] to perform.”
There has been a $26m “improvement in operating profit” (or rather decrease in operating loss) in the most recent year and the company is on a strong growth path, Ellis says. A single large contract from Fonterra (Computerworld, December 15, 2003, page 3) clearly helped in a major way, but significant business is flowing in from the staples of government, finance and telecommunications.
There was some confusion over the number of the new jobs at EDS that were taken by New Zealanders; initially it was suggested only half had, but eventually the parties decided that there were only 18 overseas people on the new roll, this being almost half the 50-strong contingent of production engineers. There are also 90 contact-centre staff providing technical help-desk services to overseas EDS clients, 50 in development and testing (“They’ll receive code in the morning from the UK and test it through [the European] night and have it back to them in their morning,” says Ellis) and 15 in IT operations; these are said to be all NZ citizens or long-term residents.
The foreigners on staff are a plus rather than a minus, Ellis and Anderton argue, since they are transferring their skills to New Zealanders. “It’s no secret that shortage of skills in the local workforce is our biggest problem,” Anderton says.
About $18m of revenue has been directly bookable to those staff so far, coincidentally equal to the investment EDS kicked into the Best Shore partnership; but there’s some way to go to make its full investment back, “because you’re obviously talking about the margin on that revenue,” Ellis says.
Government, meanwhile, has taken 18 people off the benefit by putting them into the EDS jobs and another 15 are due to move; that alone represents savings of half-a-million a year to the taxpayer, Anderton says.