A Springboard To Services

The other factor is that in effect the only part of the HP business materially impacted is the Outsourcing and to a lessor extent Consulting and Integration business. The printing (IPG) and PC (PSG), as well as servers, storage and software are not directly involved and free to go on in a business as usual fashion. Whilst this does not make the integration of 140,000 people an easy task, unlike the Compaq transaction, the people are in a smaller part of the business.

Official word today of the acquisition, on the back of a good preliminary release from HP number wise.

http://www.hp.com/hpinfo/newsroom/press/2008/080513a.html

·         IBM clearly are the target of the transaction, and will need to have even more competitive focus on the merged entity. In many ways, IBM did not really take the HP Services business with the credibility that it may have deserved. Now it will be aware of HP/EDS in each and every infrastructure transaction

·         Sun, Dell and EMC can expect a risk of a staged transition out of EDS and the Agility Alliance, they will need to respond to this, and perhaps look to acquire services providers to maintain relationships

·         CSC, Fujitsu, Unisys and other smaller services companies are challenged. If the merged entity is able to maintain the HP culture of customer satisfaction, and EDS’s capability of significant IT transformation, it will make it harder for these smaller entities to engage with large Fortune 500 organizations

Winners and Losers

·         Clients who will get more integrated services and end to end capabilities

·         Accenture – Whilst the love between Accenture and HP will largely be further smothered, Accenture will know that IBM has to focus more on the merged HP/EDS entity from a competitive view allowing them a little breathing space. The risk is the depth of HP/EDS relationships in infrastructure may block Accenture out from related discussions

·         Microsoft, SAP and Oracle will be able to focus more on a broad range of scaled solutions reflecting the best of HP and EDS.

·         Corporate banks and lawyers who specialize in Mergers and Acquisitions. Springboard Research believes that this deal may spark further consolidation, scale is clearly key here, and aside from IBM, HP/EDS, and in the Applications space, Accenture, the rules for what scale is have been recast. It may occur that as Oracle has sparked massive consolidation in the Software space, this deal will do the same for services.