IBM: HP-EDS deal unlikely to challenge us

by Editor 6/9/2008 3:52:00 PM

Tech giant IBM said on Sunday that Hewlett-Packard's acquisition of consulting and outsourcing firm EDS last month is not likely to challenge IBM's leading position on the IT services market.

Rajesh Nambiar, vice-president of IBM India, said: "Hewlett-Packard has bought 'yesterday's business model'... it is unlikely to challenge our presence in the IT services space," adding that the combined revenue of the two companies was estimated at $36 bilion, which is far behind IBM's estimated $52 billion. 

"EDS have a huge labour force, but they are concentrated in high-cost jurisdictions and they really lack the global delivery capabilities that are expected of services, margins... or services businesses these days. So HP is going to have to devote an extensive amount of time and resources to improve this business model that is aged and out of date," Nambiar said.

Analysts believe that the move may propel Hewlett-Packard to the second spot in the technology services sector, which would in turn signify tougher competition with IBM. In instances where systems integration and management projects needed to be won, HP-EDS would have an advantage, according to analysts.  

Nambar added: "Though HP-EDS will try to cross-sell their products, they lack consulting skills. Clients today look for overall solutions and both the companies currently does not have (sic) any consulting capabilities. It is extremely difficult to integrate a services business into a core business like HP's. There's going to be cultural differences to overcome. There will be technical and channel differences that they'll have to overcome"  



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