Hewlett-Packard's plans for EDS
Now that Hewlett-Packard has officially purchased outsourcing giant EDS for $13.9 billion, who's in charge of the services strategy?
Officially, EDS is now an HP business unit based in Plano, Texas, and its CEO, Ron Rittenmeyer, now reports directly to HP (HPQ) CEO Mark Hurd. It's a setup that suggests EDS will continue to call many of its own shots, while benefiting from HP's economies of scale in functions like human resources, finance and IT.
When HP announced the EDS acquisition deal in May, that structure caught a number of observers by surprise. Some had expected EDS would fall under the command of HP's enterprise technology group (also known as the Technology Solutions Group), which has blossomed into a growth and profit machine under the leadership of executive VP Ann Livermore.
Instead, in his first public comments about the deal, Hurd took a deferential tone when talking about EDS's services legacy. "Frankly, EDS is more mature and more sophisticated in many of the processes they bring to market than we are," he told investors.
But a clearer picture may emerge on Monday, when Hurd, Livermore, Rittenmeyer and other HP executives brief analysts on their post-merger plans for EDS. Don't be surprised if beginning Monday, the EDS crew in Plano appears to be on a somewhat shorter leash than they did a few months ago.
Why? HP always had too much at stake to let EDS do its own thing. EDS is a sprawling services business with a bloated cost structure and more than 100,000 employees – making it cumbersome enough to weigh down HP's profits and sink its stock price unless executives can tame it. A big reason HP felt confident enough to do the deal in the first place is that executives felt they've gotten good enough at finding savings (and presumably issuing pink slips) that they can take at least $750 million in costs out of EDS.
Livermore could be a significant player in that process. While on paper EDS will handle the outsourcing business while Livermore's group provides technology backup, there's more to it than that. Livermore was more than a passive observer in the EDS purchase – she was a major catalyst for the deal, and along with Hurd and chief strategy officer Shane Robison, she was among its chief architects. Officially or not, expect her to be among the folks behind the scenes making sure it works.
In fact it was Livermore who originally got the ball rolling on the EDS deal last fall. Things heated up after she had to pass on bidding for four multi-billion-dollar IT outsourcing deals because HP didn't have the resources to do the work. "Customers wanted to buy more from HP, and yet I didn't have a big enough services organization to respond to them," Livermore told me. The solution, it seemed, was to consider buying a company to beef up HP's arsenal.
So Livermore huddled with Hurd and Chief Strategy Officer Shane Robison to take a closer look at EDS. Later, Livermore spent hours with Hurd on the patio outside his office, considering big questions – like how an acquisition might be done and what customers would think – and even smaller ones, like how much money HP could save by merging its billing and invoice system with EDS's.
Livermore said that after streamlining HP's homegrown services business, she was comfortable pursuing EDS. "That was what I wanted to do first, to make sure I had a strong business to integrate something into," Livermore told me in May. The implication here: even if EDS won't technically get folded into HP's smaller services organization, that's what's happening culturally.
Considering all that, it would be silly to imagine that after helping to craft the deal and serving as Hurd's sounding board, Livermore will simply step back and take a supporting role. Instead, based on summer chatter in online comment forums about layoffs at EDS, I expect HP to say on Monday that EDS has continued to reduce a sizable chunk of its U.S. workforce (with more reductions coming). And I also expect to hear that EDS is working very closely with Livermore's group to drum up the large-scale consulting deals that HP craves.
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EDS and HP have excellent workers. EDS has awful, uncaring management. Ask the employees and the customers. The hope is that the new HP Managers will be able to lead and motivate the workforce. Integrity is a black hole with EDS Management.
I hate their friggin India or Philipine based tech support. It took me a whole 25 minutes to be able to connect with someone and communicate the model number of my HP printer.
"M-L-1-5, no M, no M as in Mary, L-1-5, no L, no M-L. Let's start all over …"
I'm working for EDS in France and I'm confident that HP will find a lot of US and UK EDS managers with no added value spending time to micromanage other countries by controling activities, validating stupid workflows and by final, destructing any local management initiatives.
Hurt and Ann : you have a great opportunity to clarify and simplify EDS organization which is more looking – from my point of view, and from the point of view of many of my collegues – as a private and expensive administration than a flexible and business oriented company !
Good luck !
I support computer hardware. When contact Dell Chat I get someone in SLCUT (that's the code that comes up), when I contact Lenovo Thinkpad support (IBM) I generally get someone down sought like in Alabama.
When I contact HP I get India for customer service, and I get someone in an Asia country.
Keep in the mind that the U.S. Govt. (including the US NAVY) typically purchases equipment from the lowest bidder. That being said, you also get what you pay for. Now do the math. Nuff said.
I left HP on my own after 19 years. Eight years ago during the Fiorina Dynasty I saw the writing on the wall. Seeing CF as a darling of the McCain campaign and here he mentioned as VP material only reinforces my concern about McCains decision making processes.
While at HP I had the "pleasure" of working with some EDS'ers and the irony of their laments here is not lost on me. They were, to say the very best I can say, only as arrogant as the Aurther Anderson types.
To read the crying and whining about how bad HP is treating or dind treat them only makes me wonder what would happen if the proverbial shoe was on the other foot.
As for Bill and Dave turing in teir graves I can only second that comment. HP WAS a model of respect for the individual employee an at the same time a model of business success for its industry. Now after CF and with Hurd it is neither.
Sure, they'll cut costs by firing 25,000 employees. But what were those people doing – nothing??? Current EDS customers will probably be on red alert status to see what kind of "service" a company will provide after it cuts so many jobs.
I have a HP laptop and I would never buy another one. These companies keep out sourcing and expect us to buy there junk. Once they have everyting out sourced who is going to be able to buy there stuff anyway with no jobs.
This will be used to clean house. In particular, HP will fire many Americans and then hire overseas.
Yeah, HP/EDS, you people are horrific.. You hired my ex husband back in February when you acquired Bristol Myers Squibb. You let him go three weeks ago. Thanks. I really needed that.
Josh, it will probably never change. I work for one of HP's outsourced agencies that provides help desk tech support for nearly all commercial printing products in the Americas. OF the 800 workstations in the building, possibly 50 are HP, the rest are Dell. The server farm is all Dell. HP knows this, they are onsite frequently. Kinda makes one wonder… And just to make all of you feel better, I'm not in the U.S. A lot of tech support and customer service is here in Canada as well as El Salvadore.
Josh makes a great point that some EDS accounts currently use non-HP equipment. That will change soon and provide a big upside to HP as EDS and HP start to co-market their offerings.
For these guys, employees are disposable. There is no mercy for human suffering as a result of their relentless cost cuts. In the long run, HP/EDS will pay for the loss of loyalty and poor customer satisfaction.
I am typing this comment on a DELL computer in the Navy-Marine Corps Intranet operated by EDS, an HP company. All of our computer here are Dells. They are all on a network now ran by HP. I wonder how long that will take to change. The largest intranet in the world uses Dell computers and is ran by HP. LMAO.
I am an EDS, now HP employee. At my location alone there have been rounds and rounds of layoffs. We have also taken SEVERAL salary cuts. One of which was only applied to EDS employees!?!?! When Rittenmeyer sold EDS, he sold out all the loyal EDS employees that have been here for decades.