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IT services 'mega-child' DXC takes first steps

The merger of CSC and HPE Services is complete and the new company will focus on digital transformation

The company created by the combination of US IT services giants CSC and HP Enterprise Services is up and running after it was listed on the New York Stock Exchange.

The two IT services firms end periods of turmoil to become DXC Technology, which has digital transformation expertise at its core.

In May 2016, the companies announced plans to come together. They said they would have combined sales worth $26bn and would save billions of dollars in costs by merging, including $1bn in the merged entity’s first year.

The new company has 170,000 staff and 6,000 enterprise and public sector customers in 70 countries.

CSC CEO John Michael Lawrie, who will become CEO of DXC, said digital transformation would be a core activity for the new company. “The DXC Technology brand will be built on a foundation of trust and transformation, and a relentless drive to help clients thrive on change,” he said.

Both companies have struggled to grow in the same way as competitors such as the Indian IT services firms.

HP has struggled in IT services in recent years. In 2008, it paid $13.9bn for IT outsourcing pioneer EDS, but a few years later the value of this acquisition had fallen by almost $9bn. In November 2015, HP split into two separate companies – the printing and devices business HP Inc and the enterprise-focused HPE.

CSC has also faced challenges. In May 2015, it split its business, forming CSC US Public Sector and CSC Global Commercial, with the latter focusing on enterprise and non-US public sector sales. This was seen as a strategy to make the company easier to digest for any potential purchaser, or easier to manage during a merger.

But is the merger anything more than two old-timers helping each other to stand upright? Rachael Stormonth, executive vice-president at NelsonHall, thinks so. She said businesses should forget what they knew a few years back about CSC and HP Enterprise Services.

“Each has become leaner and fitter, and CSC has benefited from a series of acquisitions in recent years that have brought in new capabilities in digital and in industry-specific IP,” she said. “The new company is well positioned to be a dominant player in next-generation IT services and solutions.”

John Madden, global practice leader for IT services at Ovum, said bringing together two well-known, experienced IT services players would give customers a strong new provider as the digital transformation trend continues.

“DXC Technology, as a pure-play services provider, can build on HP Enterprise Services’ and CSC’s successful histories in cloud, security, application services, mobility and BPO throughout multiple vertical industries with customers who are undergoing various stages of transformation,” he said.

CIOs at customers including Coca-Cola FEMSA, Health Service Executive Ireland, United Airlines and Rockwell Collins spoke out in support of the merger.

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