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IT Services

HPE-CSC services merger is all about scale

Hewlett-Packard Enterprise is backing out of the services business through a merger that will see its Enterprise Services division combine with CSC. The emerging organisation will retain the CSC name and be a $26bn revenue company better positioned to take on the might of IBM Global Services and Accenture.

Mike Lawrie, the current CSC CEO who will lead the new company, described the IT services sector as “rapidly changing” in the company announcement. That’s true: as more firms attempt to pull off transformation projects using a combination of offshoring, outsourcing and cloud, many will turn to cloud and digital user experience specialists, but the largest will almost inevitably look to organisations of a similar scale. And this is a deal that is all about scale and providing a competitor that is almost as big as Accenture by revenue.

CSC, IBM, Accenture and others are attempting to have it both ways. On the one hand they are turning to boutique consultants that have access to the latest skills in hot areas like cloud, apps, mobile and security. Look, for example, at IBM’s recent acquisition of Bluewolf or Accenture buying Tequila and Cloud Sherpas. But they also need the sheer heft to pull off the biggest deals and combinations such as HPE-CSC will help to win economies of scale. And that, let’s face it, is another way of saying that there will be redundancies as replicated roles emerge.

Should IBM and Accenture be worried? IBM remains a complex blend of hardware, software and services and is busy reconfiguring itself once again and may be targeted. Accenture has made smart moves that make it more agile, despite being so large. CSC has long been the ‘quiet man’ in the sector and it will be interesting to see if the new CSC attempts to throw money at marketing to raise awareness. Certainly there is the chance to win accounts where companies are revamping to create a better digital experience for customers and partners.

As for HPE, it keeps a stake in services but has the chance to build an infrastructure company that sells through channels. Its nearest equivalent might well be the new, post-EMC Dell.

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Martin Veitch

Martin Veitch is Contributing Editor for IDG Connect

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