What does HP+EDS mean for IT?

It's a chance to strike new deals, says Frank Hayes

How many heads will roll at EDS? That's the obvious question, now that Hewlett-Packard is buying the company. A back-of-the-envelope calculation says that at least half the employees of HP+EDS are in services, but they generate only one-third of the revenue. Conclusion: Up to 50% of them will get the chop. It's the obvious question — but the wrong one for IT departments. You can safely figure that HP CEO Mark Hurd will do his usual slashing at EDS. That'll be tough for the 20,000, 40,000 or 60,000 EDSers who lose their jobs. But for corporate IT, unless you want to snap up some of that newly liberated EDS talent, that's irrelevant. The big question is how HP+EDS will make your job tougher. Figuring that out isn't as much fun as bewailing the lost jobs or speculating about how long it will take Hurd to integrate the two companies (remember Compaq?). But whether you'll still be able to get the same products and services — and whether they'll cost you more — are the issues that matter. Some of the dots are easy to connect. If you're a US-based corporate EDS customer, expect your IT services to be provided from the other side of the globe. EDS was already in the process of shifting as many as two-thirds of its jobs offshore. With the HP buyout, that's going to accelerate. The one quarter of EDSers who currently work on US government accounts will stay in that country, along with a little project-management glue and salespeople. But that'll be it. That won't be enough to reduce the headcount by tens of thousands, though. For that, HP+EDS will need to automate its datacentre management business — in a big way. Datacentre automation can be a wonderful thing, especially if it's tuned to meet your business needs — getting rid of dreary, routine IT scut work and freeing up staffers to be more responsive to business users. But when HP+EDS automates your datacentre, the priority will be to cut HP+EDS's costs, not improve your company's performance. So if EDS runs your datacentre, and HP+EDS heavily automates it, will you still get the responsiveness you need? Maybe. It's certainly an issue worth revisiting at contract renewal time. Will EDS suddenly become a sales arm of HP? Probably not. EDS works in big, multivendor datacentres where HP can't offer every product that's needed. Vendor-agnostic services will remain a virtue by necessity, even if that means EDS is moving hardware from HP's biggest competitor. What about EDS's custom application development business? Consider this: It can't be heavily automated. It has a long history of failed projects. It's oriented to building huge, monolithic systems in an era when packaged applications and agile development are the way everything is going. That's not a business line you can count on HP to expand. Here's one more thing for EDS customers to think about: EDS has spent recent years culling its "underperforming" customers — the less-profitable, more-demanding ones. That's a reasonable business practice. But with new pressure to cut costs and boost revenues, HP+EDS is pretty certain to raise the bar for what qualifies as a good customer. So drive the hardest bargains you can. Make sure you get the service quality and responsiveness you need. But remember: In the midst of big layoffs, forced automation and increased offshoring, EDS employees aren't the only ones facing the chop. The next one to get it could be you.

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