After more than two years of heated legal fighting Electronic Data Systems Corp. and Computer Associates International Inc. have ironed out a compromise, striking a long-term agreement last week.
The outsourcer and the software vendor signed a 12-year agreement, which gives EDS broader use of Computer Associates software.
In the past, the relationship between the two companies created a lawsuit and a countersuit over fees due Computer Associates from EDS for adding customers to the outsourcing firm's data centers.
Originally, this suit also named First Fidelity Bancorp of Lawrenceville, N.J., a client of EDS, which was using Computer Associates software. The bank resolved the year-long legal dispute with Computer Associates in August 1993.
These suits - along with others lodged by Computer Associates and similar software vendors - led to an ongoing debate over whether companies should pay license transfer fees to the software vendors for extending their use of the software.
Although neither side would comment on how the question of licensing fees was resolved, both companies dropped their respective complaints as a prerequisite of the alliance. According to Kurt Siebert, a senior vice president at Computer Associates, the new relationship is based on "one master agreement" rather than several separate ones which may have been more easily misinterpreted.
"This is far more comprehensive," said Jon Senderling, the press relations manager for EDS. "This simplifies and streamlines all the questions by putting an umbrella over the agreement."
Under the new agreement, EDS becomes a value-added reseller of Computer Associates software with the right to resell $100 million worth of the vendor's Unicenter product. The companies are also discussing a possible outsourcing agreement.
Mr. Siebert maintains that this there exists a "very positive mood" between both his firm and EDS, and denied that Computer Associates' aggressive stance on licensing fees was anything unusual.
"If you look at eight lawsuits over the past few years, among thousands of customer," Mr. Siebert said, "that's not a lot."
The focus changed, Mr. Senderling said, when Gary Fernandes, EDS' senior vice president in charge of business development, became involved. He said the sparring rivals began "looking in a macro sense at the entire situation."
But, some industry experts see this deal as a quick way to sweep the past under the rug and move on to more important deals that may have been complicated by their legal disputes.
EDS last week confirmed that its officials were indeed, as earlier speculated, locked in discussions with telecommunications giant Sprint over a possible merger. Right after the announcement of the EDS-Computer Associates deal, the Islandia, N.Y.-based software vendor acquired the Ask Group Inc., a business software developer in which EDS owned an 18% stake. EDS and Hewlett-Packard, which together represented a 27% equity in the company, both agreed to tender their shares in the company to Computer Associates, according to spokesman Bob Gordon.
"It was seen as expedient toward the merger effort," said George Logemann, director of management strategies for the Yankee Group, a Boston-based consulting firm.
Although some experts have debated both companies' aggressive business methods, it appears that this alliance will be a mutually beneficial one for both.
"Given EDS' track record, it usually can be inferred that we don't do something unless it's profitable," Mr. Senderling said.