EDS is now an HP company; HP announced on Tuesday that it has completed its $13.9 billion acquisition of the Plano, Texas-based outsourcer. HP now embarks on an ambitious and critical integration plan, the details of which will become clearer soon, says analyst firm Ovum.
HP closes on EDS deal: now the real work begins
EDS is now an HP company; HP announced last week that it has completed its $13.9 billion acquisition of the Plano, Texas-based outsourcer. According to Ovum, the advisory and consulting firm the deal closed in remarkably quick timescales for it size, but more openness about timetables is needed.
“Managing the expectations of all the stakeholders (be they staff, customers, investors or analysts) in large M&A situations is never easy, but HP has set out on a strong path. The day that a deal officially closes sees everyone wanting to know every piece of detail about everything for the next three years – clearly unfeasible.”
“Last week’s announcement was truly historic for the IT industry, if a bit anti-climactic on how much detail HP was willing or able to disclose about its next moves. HP was very proactive in meeting with analyst firms like Ovum to discuss the deal’s close, and updates later this year are already planned; we applaud that approach. But much of what was covered had already been publicised: HP’s outsourcing organisation will be folded into EDS, which now becomes HP’s fourth business group and which will remain based in Plano. EDS CEO Ron Rittenmeyer will continue in his leadership role, and the EDS Agility Alliance will continue with EDS’s new parent company as a primary member”, says Ovum analysts, John Madden and David Mitchell.
“Some of the most critical questions on headcount reduction and improving EDS’s cost structure – which will be accomplished, no doubt, by leveraging HP software, tools and best practices – are still to come. There’s also the important matters of how acquiring EDS will alter HP’s go-to-market model, sales structure (both in outsourcing and in the company as a whole) and services delivery organization,” Ovum’s analysts added.
Under the plans some of HP’s consulting capability will move to EDS. A maneuver which Ovum says is a “sound move”.
According to HP, portions of Consulting & Integration dealing with more ‘industry standard’ services, such as SAP and Oracle services, will shift to EDS’s consulting group. C&I capabilities that are embedded with specific HP products and solutions will remain part of the TSG business group (TSG will also retain HP’s technology Support Services group).
“We think this change for C&I in the long term will be a very sound move – pending more details, of course. We’ve argued that keeping consulting close to the outsourcing organization is one way HP can position itself in the future as a stronger competitor and alterative to consulting giants such as Accenture and IBM – provided that HP continues to make additional consulting investments,” add Madden and Mitchell.
The ‘new’ global EDS leadership team, with Rittenmeyer at the helm, was also formally announced, and many current EDS executives will be staying on. This team will be charged with leading a combined HP-EDS services business that, as of the end of fiscal 2007, had annual collective revenues of $38 billion and 210,000 employees.
