HP/EDS – The Devil Is In The Detail

Last night’s HP US investor briefing shed little additional light on precisely how EDS is to be integrated into the business, or where exactly the near-25,000 job cuts are going hit. This latter point will of course take some time to become clear as employee and union/works council negotiations get under way. But HP says it will replace about half that number over the next three years “to create a global workforce that has the right blend of services delivery capability…” so I think we can all guess which countries are going to see the bulk of that hiring!

We’ve already thrown our support behind the deal - with appropriate caveats (see HP completes EDS deal). But with an acquisition of this size and scope, the devil will truly be in the detail – country by country. The UK will be probably HP’s most challenging market to integrate outside of the US. EDS UK has some 16,500 employees and represents about 18% of EDS’ total revenues, a considerable part coming from UK government. The scale and complexity of the services that EDS delivers into the UK is likely to be orders of magnitude greater than HP’s, which tend to centre around hardware provision, deployment and support (witness yesterday’s $660m contract extension with BT) rather than EDS’s highly bespoke consulting, development, integration and outsourcing services. And all this, to be achieved in some of the most challenging market conditions we’ve seen for years.

This is going to be hard, painful work, but we have always believed that consolidation at the top of the services tree was inevitable. This transaction materially changes the shape of the UK IT services market, so we will of course be following the story very closely