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.
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.
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