HP-PwC deal forecasts hosting future

Whether or not the proposed merger between Hewlett-Packard and PricewaterhouseCoopers ever becomes consummated, one thing is clear: the ability to deliver large-scale software services over the Internet is about to permanently alter the competitive landscape of the computer industry.

Whether or not the proposed merger between Hewlett-Packard and PricewaterhouseCoopers ever becomes consummated, one thing is clear: the ability to deliver large-scale software services over the Internet is about to permanently alter the competitive landscape of the computer industry.

HP has confirmed that it is discussing a possible merger with PricewaterhouseCoopers (PwC) — a pact that would allow HP to combine its emerging E-Services suite of technologies with the system integration skills of PwC. A combined HP-PwC entity would compete more effectively with IBM, which has achieved most of its renewed competitiveness by combing the skills of its IBM Global Consulting business with its technology platforms to deliver a variety of e-business solutions. But more importantly, it would give HP the skill set it needs to meet the challenges associated with next generation business computing models. Those models, which allow companies such as HP, IBM, Sun and Microsoft to evolve into computing utilities that deliver software services on a pay-for-usage model, already are under development. HP, for example, has outlined a number of e-services offerings, including plans for managed network and desktop management services and has created an E-Speak application integration architecture. HP's plans for e-services are similar in concept to what Microsoft has outlined for its Microsoft.NET initiative, which allows IT organisations to tap into software components and services hosted on data centres run by Microsoft and its partners. Outlining a similar framework using its technologies, IBM has partnered with a range of companies to create a base of more than 50 data centres capable of deploying its software services by next spring. And Sun, through the auspices of the Sun-Netscape Alliance, is also expected to deliver a similar set of software services using Java technologies. Computer vendors are not the only companies in the industry drifting toward this model. Many of the large systems integrators see the ability to either aggregate software services from third-party ASPs (application service providers) or build their own data centres to host these applications. What's driving large-scale system integrators to this model is a shortage of talent. The PwC business model is contingent on its ability to hire enough talented people to support all of the individual needs of its customers. Today that means dedicating people to specific projects for extended periods of time. It also means hiring kids straight out of college to work on these projects. So if PwC really wants to continue to grow, it must find a more efficient business model. Fortunately for them, the Internet is creating a new electronic distribution mechanism for their services. The ASP opportunity exists because right now there is no effective mechanism for integrating disparate applications provided by different vendors over the Web. But if IT organisations could rely on systems integrators for this capability, these companies then would be providing a significant service. At the same time, the shortage of human capital is pushing these companies toward running their own data centres. Just about every Web start-up company relies on a data centre partner such as Exodus to host its applications. It's only a matter of time before systems integrators apply that same model to corporate enterprise applications, which would allow them to leverage more people across a greater number of customers. But time is running out. Already a handful of small, well-financed, managed service providers such as Loudcloud are defining this space. And with billions of dollars in services revenue at stake, the merger and acquisition frenzy that will create some previously unthinkable entities is only just beginning.

Michael Vizard is editor-in-chief of InfoWorld. Send him e-mail at michael_vizard@infoworld.com.

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