EDS to take last crack at AU$1bn ATO mega deal

The Australian Tax Office is preparing to put the last and largest of its IT outsourcing contracts — centralised computing — up for grabs, worth around AU$160 million per year. This is EDS's last chance to retain work with the ATO and possibly its first bid since its proposed acquisition by HP.

This Friday, the ATO will brief around 170 representatives from hopeful suppliers on its datacentre, mainframe, and data warehouse needs. The multi-year deal will also cover storage, disaster recovery, software management, and physical datacentre security.

The deal will follow a similar course to the ATO's past two outsourcing tenders, for end-user computing and managed network services, an ATO spokesperson told ZDNet.com.au.

After Friday's briefing, candidates will lodge an expression of interest (EOI) in tendering for the contract, forming the basis of the ATO's shortlist of suppliers to workshop their respective offerings — a process that takes up to a year and costs AU$1 million to complete, according to the ATO's CIO, Bill Gibson.

In the past, the ATO has prescribed how technology should be delivered, however, last year's review of the ATO's outsourcing strategy by the Boston Consulting Group recommended the agency only describe its business needs, leaving scope for vendors to come up with their own solution.

Although around 70 vendors attended each of the past two briefings, around seven EOIs were lodged for the managed network services contract — an unsurprising amount due to the scale of the contracts, according Gibson.

Noticeably missing from the previous shortlists is incumbent department-wide supplier, EDS, which so far has failed to recapture any part of the ATO's outsourcing work it had previously held.

If EDS is not selected for the final tender, it will mean the final nail in the coffin for its decade-long deal with the ATO, currently under a two-year extension bridge that is set to end in 2010 as the ATO inducts its new outsourcing partners.

But while it could spell the end for EDS, by the time EOIs for the centralised computing contract are due, it might also be the first major contract EDS bids for as an HP company, which some analysts say could be an advantage.

HP's US$13.9 billion acquisition of EDS in May is still not complete, which means the two companies must still behave as competitors and are not allowed to communicate, according to Gartner IT outsourcing analyst, Rolf Jester.

But according to Hydrasight analyst Michael Warrilow the major benefit of a union between HP and EDS will be to alleviate the usual sourness that comes with a long term IT outsourcing contract such as it has held with the ATO.

"EDS couldn't stand a worse chance as a result of the acquisition because the animosity that generally develops between customer and outsourcer can lead to situations where they will get restricted from renewals. In that respect, it may help," he told ZDNet.com.au.

On the other hand, HP lacks mainframe software — an area which Warrilow said EDS is more capable in. EDS late last year managed to retain its mainframe contract with Commonwealth Bank of Australia, but lost almost AU$1 billion worth of application management work to HCL, IBM and Tata Consultancy.

"When you get to that über IT level, it gets interesting. EDS, under HP, will maintain a core competency around IBM mainframes. They manage them globally and historically, EDS has used a lot of IBM software to manage their mainframes," he said.