Will Logica's strong internal culture be broken and cause an HP EDS like failure?

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News that the new owners of Logica, Canadian company CGI, will cut the workforce by 700 at Logica as part of its £1.7bn takeover. Read more here.

Could this make integration difficult? Robert Morgan, director at sourcing consultancy Burnt-Oak Partners told me that Logica has a workforce bonded by a strong culture.

This makes me think about what happened at EDS when HP acquired the company. Lots of people were let go and the core culture of the company which, according to former staff, was to deliver excellent service levels was broken.

HP recently that it would write off $8bn after the business it acquired in 2008 for $13.9bn, was devalued.

Also see ten reasons why EDS is worth $8bn less than it was four years ago.

According to the Times Logica said: "Regrettably, the integration process, as expected, has identified potential job redundancies in UK-based global functions and UK corporate and back-office functions resulting from the combination of the two businesses," CGI said.

So could CGI commit a similar error with Logica?

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Unlike HP, CGI is a successful services company, so there should be less of a cultural gap. CGI also seems to be better at making a profit from its services than Logica, and has parachuted in its own senior management team to replace Logica's (failing?) management. As for Logica's culture, it has not always enjoyed the most positive reputation e.g. a tendency to replace skilled and innovative UK-based staff with less experienced (but cheaper) offshore workers, a "body shop" mentality, and at least one failed offshore project for the UK public sector. If Logica's "culture" had been more successful, it wouldn't have been so vulnerable to take-over by CGI. But the greater risk might be to CGI from the toxic baggage it has just acquired, rather than to whatever remains of Logica when the dust has settled.

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This page contains a single entry by Karl Flinders published on September 17, 2012 10:42 AM.

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