But the deal has also faced its share of criticism. While some analysts have prognosticated that the takeover is going to slow down HP’s revenue growth as EDS has seen an average growth of merely 2.8% since the year 2001, others alleged that it would have made more sense to buy business process outsourcing services rather than IT infrastructure outsourcing services, which EDS offers. Furthermore, there are even suggestions about the deal being overpriced.
But HP appears to have no qualms in taking
the deal forward. The companies’ collective annual revenues from services business by the end of fiscal year 2007 were more than $38 billion as against rival IBM’s $54 billion. Moreover, if the growth rate of IBM and HP-EDS is compared, IBM is growing at 10%, while the HP-EDS duo will be close at 7%, way ahead of other major players like Accenture and Fujitsu. So the HP-EDS combine has just one target to overcome, IBM.
Apart from all this, there is one more fact that makes this deal even more lucrative for HP. Besides enabling cost control, HP would relish the opportunity to sell more of its hardware to EDS’s existing clients. Trimming of operating costs is going to result in cutting a large number of jobs, but then in the long term, the company expects market value, market share, revenue and profits to shoot up.
At a time when the IT services market is expected to grow at over 7% a year, this acquisition makes sense, especially when it is a consolidation of enterprises which have been in the top 5 list in the IT services sector and cater to the same line of business. Mark Hurd, CEO, HP comments, “There’s tremendous leverage you get from scale… We’re spreading our cost structure across a much larger revenue base. We expect to bring that capability to EDS.” Supports David Mitchell, Senior VP, Ovum IT Research, London, “Scale is fundamentally important in the IT industry, and especially in IT services. It allows a supplier like IBM or HP, to take on the largest projects and invest in assets that can repeatedly be deployed in different customer settings. Acquisition of EDS immediately take HP closer to IBM in scale and adds a huge amount of IT services capability – at a stroke.” EDS’s core competence lies in infrastructure management services and custom application services. But the company is weak in providing services for packaged applications, which may be a stumbling block in the consulting space.
Besides, competitors won’t sit quietly. Accenture, for instance, has already agreed to acquire Brazilian ATAN, a privately held industrial IT and automation solutions provider, which will enhance its management consulting, systems integration and technology consulting. In a nutshell, despite its advantageous position, the HP-EDS combine should expect a tough fight ahead.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
But HP appears to have no qualms in taking
the deal forward. The companies’ collective annual revenues from services business by the end of fiscal year 2007 were more than $38 billion as against rival IBM’s $54 billion. Moreover, if the growth rate of IBM and HP-EDS is compared, IBM is growing at 10%, while the HP-EDS duo will be close at 7%, way ahead of other major players like Accenture and Fujitsu. So the HP-EDS combine has just one target to overcome, IBM.Apart from all this, there is one more fact that makes this deal even more lucrative for HP. Besides enabling cost control, HP would relish the opportunity to sell more of its hardware to EDS’s existing clients. Trimming of operating costs is going to result in cutting a large number of jobs, but then in the long term, the company expects market value, market share, revenue and profits to shoot up.
At a time when the IT services market is expected to grow at over 7% a year, this acquisition makes sense, especially when it is a consolidation of enterprises which have been in the top 5 list in the IT services sector and cater to the same line of business. Mark Hurd, CEO, HP comments, “There’s tremendous leverage you get from scale… We’re spreading our cost structure across a much larger revenue base. We expect to bring that capability to EDS.” Supports David Mitchell, Senior VP, Ovum IT Research, London, “Scale is fundamentally important in the IT industry, and especially in IT services. It allows a supplier like IBM or HP, to take on the largest projects and invest in assets that can repeatedly be deployed in different customer settings. Acquisition of EDS immediately take HP closer to IBM in scale and adds a huge amount of IT services capability – at a stroke.” EDS’s core competence lies in infrastructure management services and custom application services. But the company is weak in providing services for packaged applications, which may be a stumbling block in the consulting space.
Besides, competitors won’t sit quietly. Accenture, for instance, has already agreed to acquire Brazilian ATAN, a privately held industrial IT and automation solutions provider, which will enhance its management consulting, systems integration and technology consulting. In a nutshell, despite its advantageous position, the HP-EDS combine should expect a tough fight ahead.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
Read these article :-
ZEE BUSINESS BEST B SCHOOL SURVEY
B-schooled in India, Placed Abroad (Print Version)
IIPM in Financial times (Print Version)
IIPM makes business education truly global (Print Version)
The Indian Institute of Planning and Management (IIPM)
IIPM Campus
Top Articles on IIPM:-
IIPM makes business education truly global-Education-The Times of ...
The Hindu : Education Plus : Honour for IIPM
IIPM ranked No.1 B-School in India, Management News - By ...
IIPM Ranked No1 B-School in India
Moneycontrol >> News >> Press- News >> IIPM ranked No1 B-School in ...
IIPM ranked No. 1 B-school in India- Zee Business Survey ...
IIPM ranked No1 B-School in India :: Education, Careers ...
The Hindu Business Line : IIPM placements hit a high of over 2000 jobs
Deccan Herald - IIPM ranked as top B-School in India
India eNews - IIPM Ranked No1 B-School in India
IIPM Delhi - Indian Institute of Planning and Management New Delhi ...
domain-b.com : IIPM ranked ahead of IIMs
No comments:
Post a Comment