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HP made a huge bet when it plunked down nearly $14 billion a year ago to acquire Electronic Data Systems. But now, with the economy struggling to get back on its feet, it looks like the gamble turned out to be a shrewd move.
HP announced today that it is officially renaming EDS to HP Enterprise Services. The name change marks the next major step in the company’s efforts to integrate EDS into HP, and emphasizes the growing importance IT services is playing in the HP portfolio.
In announcing the name change Executive Vice President Ann Livermore took note of the fact that during the third quarter of fiscal year 2009, the newly named HP Enterprise Business unit accounted for 47% of the company’s revenue and 60% of its non-GAAP operating profit. While the hardware side of the business has been hammered by cuts to corporate IT spending, the services side of the business has offered HP a secure mooring.
As a result it has been somewhat insulated from the pains being suffered by many other hardware and software vendors.
Despite the apparent success of the acquisition, it has by no means been smooth sailing for HP or, more-to-the-point, for the employees of EDS. As part of its integration, HP laid off some 25,000 EDS employees. Many workers were forced to take salary cuts, and EDS executives were reportedly told by HP chief executive Mark Hurd to vacate their plush offices and take up residence in cubicles.
It was predicted such radical steps would invoke an exodus from EDS, but timing was on Hurd’s side. With the economy sliding into recession and a flush pool of highly skilled labor becoming available, it is likely many EDS workers decided it was best to stay put.
Time will tell whether HP can create an organization that will allow it to compete toe-to-toe with IBM for the biggest and most lucrative IT contracts. It certainly has created a much leaner and more competitive organization and as the economy improves it will be able to capitalize on the efforts it has made over the past year to integrate and streamline the EDS business.
In the past EDS had been accused of being bloated and stodgy. Today’s name change and the Hurd-led transformation have gone a long way towards erasing that reputation.
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