EDS and MCI WorldCom are nearing completion of reciprocal outsourcing pacts similar to those entered into last week by AT&T and IBM, with a twist: EDS would buy MCI Systemhouse, rather than sell its global network to the telecom as IBM did with AT&T.
"The deals are likely to be signed before the holidays," says George Logemann, director of the outsourcing practice at Yankee Group, an IT research firm. EDS will contract with MCI WorldCom for network bandwidth, while MCI WorldCom will outsource its IT operations to EDS, which would acquire MCI Systemhouse, an IT services unit.
EDS and MCI WorldCom officials declined to comment.
Rumors of such a deal have circulated since MCI and WorldCom merged earlier this year. WorldCom confirmed that EDS and others had put out feelers for possible outsourcing deals in the wake of the merger, but denied any interest at that time. EDS already had an outsourcing relationship with WorldCom, providing some billing services.
Although EDS is in the midst of a leadership transition, replacing current chairman and CEO Les Alberthal with Cable & Wireless plc's Richard Brown on Jan. 15, signing off on the contracts this month would help boost this quarter's backlog of contracts and help satisfy a growth-hungry Wall Street, Logemann says.
Other sources indicate that WorldCom had shopped around first, talking with Computer Associates--which is making acquisitions to build up IT services capabilities--and Science Applications International Inc., as well as with Computer Sciences Corp.