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Vendors Survival: Will HP Until 2018? - Revisited

When HP intended to acquire EDS in 2008, I wrote a post titled: Vendors Survival: Will HP Survive Until 2018? - HP's EDS First Take
The prefix implies that the post was not the only post about Vendors Survival. Other posts discuss future survival of other vendors such as Microsoft, Apple, Google, SUN and EMC

The optimistic view was that HP will become a co-leader of the Outsourcing market together with IBM (The market leader). The idea was to get more revenues from the profitable Service market, because Hardware commoditization reduced Hardware profitability.
  
However, my opinion was, that the optimistic view was less realistic than other scenarios. 
It looks like my prediction was not far from reality.

HP Layoffs in 2012
On May, 23 2012, HP announced that it is cutting 27,000 jobs after posting a profit decline of 31%in the second quarter of 2012. Many of the jobs cut where former EDS employees

The Case of General Motors (GM)
On November 2012, HP agreed to transfer 3,000 of its employees to GM. GM is moving its IT services in house instead of Outsourcing to EDS, which is Outsourcing to HP after EDS acquisition by HP.
Outsourcing was EDS main Line of Business. 

GM was a unique EDS Outsourcing client
It is one of the largest clients, but the EDS tight relations with GM  were not based on size only. 

The company which was founded by Ross Perot, was acquired on 1984 by one of its clients. The client was GM.  In 1996 it was spunned off as an independent company.

I worked together with EDS in a large project they executed for one of my clients. 
many of their examples and Best Practices were based on GM projects. 

My conclusion is that loosing GM Outsourcing is a stamp of the failure of EDS acquisition by HP.

Final Notes
1. It is impossible to separate the EDS acquisition from HP management practices. For example, If it would not profit less on the second quarter of 2012, it may cut less jobs or not cut jobs at all.

2. Changes in Outsourcing market trends also influence the EDS deal consequences. Cloud Computing influences Outsourcing negatively. 
The giant Indian Outsources prices are lower than HP's prices. 

3. Will HP survive until 2021? The probability that it survive is still high, but I am less optimistic than I was on 2008. 


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More Stories By Avi Rosenthal

Ari has over 30 years of experience in IT across a wide variety of technology platforms, including application development, technology selection, application and infrastructure strategies, system design, middleware and transaction management technologies and security.

Positions held include CTO for one of the largest software houses in Israel as well as the CTO position for one of the largest ministries of the Israeli government.