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Jul 10 2019   6:22PM GMT

Ross Perot helped create the IT services industry

John Moore John Moore Profile: John Moore

IT outsourcing
IT services

In 1962, Ross Perot was an IBM mainframe salesman with a vision for providing technical expertise and services around the big machines.

He left IBM that year to launch Electronic Data Systems (EDS) in Dallas with an initial investment of $1,000. In the ensuing years, EDS helped pioneer what would become the IT services industry. EDS sold compute time on underutilized mainframes, built and managed computing centers for customers and created a network of data centers to run clients’ workloads remotely. Those services would eventually morph into IT outsourcing and, decades later, cloud computing.

Perot, who died July 9 at the age of 89, was ahead of his time at EDS and seemed to have a keen sense of repeating historical patterns. General Motors purchased EDS in 1984 and Perot transitioned from entrepreneur to GM board member. The shift proved unsuitable: Perot in short order became fed up with what he viewed as the car maker’s stifling bureaucracy and eventually departed GM-EDS through a $700 million buyout. In 1988, Perot was back in entrepreneurial mode, founding Perot Systems Corp. Perot’s investment company that launched the new venture was aptly called HWGA Partners, with the acronym standing for Here We Go Again.

EDS took Perot to court, claiming he had violated the terms of a non-compete agreement. Perot, however, asserted he was free to compete, provided he did so on a not-for-profit basis. The lawsuit played out in the Fairfax County (Va.) Circuit Court, where Perot amusingly told reporters no one could beat his prices, alluding to his non-profit status.

The judge sided with Perot on the question of competition, ruling that Perot was free to seek contracts provided those deals didn’t contemplate a profitable return. That restriction expired in late 1989 and Perot Systems was free to make money.

With the lawsuit out of the way, Perot Systems went on to capture projects with high-visibility clients and, in another example of circularity, advised Perot’s former employer, IBM, on the outsourcing business.

EDS and Perot Systems are gone now, with EDS finding its way via acquisition into DXC Technology and Perot Systems absorbed within NTT Data. But the industry Perot helped create continues to grow — Gartner forecasts global IT services spend of $1.065 trillion in 2020 — and evolve.

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