End users could be the big winners followingHewlett-Packard'sannouncement that it is to acquire outsourcing
companyEDSfor £7.13bn.
The deal is widely seen as a bid by HP to expand its services
business to challenge IBM's
dominant position.
Analysts have said the success of HP's challenge will be limited
by the strength of the BM brand, R&D budget, and business
consulting services.
However, end users could benefit during the transition by
pressing HP and EDS for more favourable terms on outsourcing
deals.
Robert Morgan, director of supplier support company
Hamilton Bailey said
the current economic climate and strong competition in the
outsourcing market will put HP under severe pressure, giving IT
directors leverage for better deals.
Commentators have advised that IT directors look at their
contracts and evaluate whether there is an opportunity to make
improvements.
HP will want to hold on to as many EDS customers as possible,
particularly financial services customers. This will put end users
in a strong position to negotiate changes, said consultants.
Phil Morris, managing director at outsourcing advisor
Equaterra, said EDS
customers may be able to invoke change of control clauses in their
existing contracts to press for better deals. HP and EDS's
competitors are likely to muscle in by offering HP and EDS
customers attractive deals. This will give IT directors more
negotiating power.
Morgan said this was particularly likely because HP has given
very few details of the business benefits it expects from the
acquisition. It has revealed little of the proposed business model
and organisational structure which could help allay customer
concerns.
"Considering how long they have been discussing this deal, it is
bizarre they have not published more details of the organisational
synergies they expect," he said.
IT analyst group IDC said it
was unclear whether all EDS customers would be pleased about
handing their operations over to HP.
"HP is a company with a very different history and culture to
EDS, and unless HP could guarantee that the elements that supported
the choice in the first place will not disappear, the shift could
make some customers very nervous," IDC said.
Connect, a 50,000-strong independent international HP user
group, was formed in May 2008 to consolidate
Encompass,
ITUG and
HP-Interex EMEA into a
single independent worldwide community of users of HP enterprise
technologies.
Nina Buik, president of Connect, said, "We are always concerned
about turns in business that could impact our members."
Commentators have also speculated that cultural differences may
push HP staff to leave the organisation, unwilling to fall under
EDS-style management for fear of losing their freedom around
decision making.
The departure of key HP staff is expected to put the company
under even greater pressure as end users seek the relative safety
of more stable competitors. There are concerns that this could
again affect the quality of customer service.
Simon Robinson, research director at
The 451
Group, said the impact of the deal for customers would depend
on how successfully HP could execute the integration of the two
companies.
Although some customers had experienced the painful integration
process after HP's acquisition of Compaq, he said HP was a changed
organisation with chief executive Mark Hurd appearing to succeed
where his predecessor had failed.
The only certainty, said analysts, was that outsourcer
consolidation was set to continue, with the fate of companies such
as Atos Origin,
CapGemini,
CSC and several others to be
decided in the coming months.
Analysis: HP's acquisition of EDS leaves questions unanswered
>>
Hewlett-Packard to buy EDS for £7.13bn
>>
HP considering EDS acquisition >>