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UK tax records affected by EDS MCI Systemhouse deal

Deal worth $17 billion. Is our data safe in Worldcom's hands?

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Electronic Data Systems today agreed to buy MCI WorldCom's IT services arm in an asset and employee swap deal valued at $17 billion. A few years ago, before New Labour was elected, the British government gave EDS permission to manage every tax record off shore. Now MCI Systemhouse will manage that function, posing questions about data privacy. Computer services giant EDS went ahead with a ten-year agreement to acquire MCI's Systemhouse unit and take on more than 12,000 MCI WorldCom employees, mainly in North America. In an exchange of outsourcing agreements, Texas-based EDS will outsource most of its global network to phone giant MCI WorldCom, making MCI responsible for the bulk of its voice and data communications services. EDS will shell out $1.65 billion in cash for the Systemhouse division. In turn, Mississipi-based MCI WorldCom will outsource much of its IT services to EDS. This includes the bulk of the company's applications development, maintenance agreements and infrastructure services. This ten-year deal is valued at between $5 billion and $7 billion. It will take on around 1000 EDS network staff. The two will also jointly work on developing network services. MCI said it is dumping Systemhouse to concentrate on the telecoms business. Tim Sheedy, IDC research analyst for European telecommunications, said this sort of deal was systematic of the current market. "Following the trend of organisations outsourcing their computer services, we've recently seen many of these deals being more of an exchange than a cash payment. This will not be the last of this kind of agreement between phone and computer companies," he said. Systemhouse reported $1.7 billion in sales last year. It has 120 offices and around 9000 staff. MCI WorldCom was formed in September when WorldCom completed its $47 billion purchase of MCI Communications. ®

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