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Heady days

From the 1970s, data processing had quickly became a rapidly evolving, highly specialised and costly operation that caused problems for even the largest organisations. By the 1980s it often entailed the use of artificial intelligence, geodemographic analysis and predictive profiling. How to efficiently deal with a rapidly growing mass of complex data in a constantly changing IT environment was a perennial headache. As information technology moved into the core of business management, companies were anxious to find expert help. EDS was there.

To some extent, the EDS phenomenon is a child of a world- wide mania for corporate re-engineering. Over the past fifteen years, in an effort to maximise profit and efficiency, businesses and government agencies of all types have been systematically downsized, asset-stripped, delayered and rationalised. Company departments unexpectedly become profit centres, while government agencies face radical change as their functions are market tested against the price offered by private sector competition. No longer satisfied to protect inefficient areas of their organisation, bosses were encouraged to identify their companies core competence, and farm out the rest of the business to specialist outside organisations. The most visible example of this activity is when the local council contracts a private company to handle garbage collection. This process is known as outsourcing, and its an industry that is growing at around thirty per cent a year world wide.

The principle of outsourcing runs along these lines: a bean bag manufacturer knows heaps about making bean bags, but precious little about anything else. To make the organisation run better, break it into component parts (bean bag factory, bean bag data processing, bean bag marketing and bean bag distribution). Identify the single element that forms the companies key expertise. Finally, farm the rest off in packages to specialist outside organisations that can do the work cheaper than you could do it yourself. Simple.

It doesn't detract from EDS's success to point out that it was the right company at the right time. The currents which swept it to its current prosperity were strong and deep. In the 1970s some companies - and investors - began to see that the creative use of data might matter as much or more than the creative use of raw materials. That meant they needed information systems. Big ones. Complicated ones. Temperamental ones. Data handling systems require expertise. Most companies dont really have it. And once the system was there, a lack of expertise was potentially fatal. There was a need for a safe pair of hands.

By getting there early, by having clearly impressive clients, and being reliable, EDS became the first choice for organisations wanting help with their data management. Because of the militaristic culture that Perot had inculcated in the company, clients called it sending for the marines.

But the marines were not just an expeditionary force. They stayed on. Outsourcing information sources to experts became seen as a wise thing to do, allowing companies to concentrate on the business they knew best. And EDS became the place that companies outsourced to.

As with companies, so in time with governments. Civil services have all the problems with data systems that corporations do. That alone might lead to outsourcing. And it was not alone. In the UK the forces of outsourcing had Margaret Thatcher on their side.

in 1979, Thatcher told colleagues that no government agency - not even defence and treasury - should be spared the market test. But it was not until 1991, with the publication of the White Paper Competing for Quality, that her vision finally materialied. In this new policy, all departments and executive agencies were required to set targets for the testing of new areas of activity against competing bidders in the marketplace. If a private company could establish that it can perform the role of government more cheaply and efficiently and with a higher quality of service, the job was theirs. Information management was always one of the new policy's prime targets. Its privatisation was not likely to be a political issue, since few people understood the esoteric domain of data processing. And there was genuine need. While some government agencies such as Inland Revenue consistently scored highly in international tests, other organisations such as DSS were hopeless. Internal barriers and ancient tradition prevented sensible integrated policy. The outsourcing mania had struck all areas of government, from driving licences and welfare benefits through to health and police. Ministers, MPs, media and corporations all began chanting the Market Forces Mantra. That meant a field day for EDS. As the process began to pick up steam, bigger and bigger prizes were offered. Eventually the Inland Revenue itself, exemplary record notwithstanding, was offered up for outsourcing. In the mind of the Thatcherites, the privatisation of tax administration would be the toughest of all challenges and the sweetest of all victories. For the big outsourcing companies like EDS, Andersen and CSC (Computer Sciences Corporation) it would be the mother of all public sector contracts.