HP leaves Dell with = an EDS-shaped hole

HP leaves Dell with an EDS-shaped hole

By Joe=20 Fay =E2=86=92 More by = this=20 author

14 May 2008 13:29

Partner swap leaves Dell feeling at a loose = end

Analysis Dell looks like being = one of the=20 losers after HP=E2=80=99s buy of EDS yesterday.

Well, apart from the staff who are likely to be axed, the EDS = customers=20 who will have to live through the integration of the two = companies, and HP=20 shareholders who have already seen a slide in the = company=E2=80=99s shareprice=20 since news of the $13.9bn deal broke.

It doesn=E2=80=99t seem that long ago that Dell and HP were = scrapping for the=20 top spot in the PC market, as if it really, really meant=20 something. HP was distracted with its borging of Compaq, leaving = the path=20 open for Dell to pontificate about the brilliance of its model = while=20 delivering quarter after quarter of apparently gold-plated = growth-fuelled=20 results.

All the while, the Texas-based PC house shrugged off = suggestions that=20 it wasn=E2=80=99t really building that much expertise at the = high-end, that its=20 lack of a proper services organisation meant it couldn=E2=80=99t = hope to be more=20 than a box supplier for global corporates, and that its lack of a = channel=20 network meant that it would be geographically restricted.

Coulda, shoulda

Dell=E2=80=99s response was that it wanted to tie its services = offerings to the=20 box itself and it didn=E2=80=99t want to make a full dive into = enterprise=20 services. Though, as Endpoint principal analyst Roger Kay says: = =E2=80=9CThat may=20 be more a matter of making lemonade with lemons because building = such=20 organizations is hard.=E2=80=9D

We=E2=80=99re sure Dell used to be pitched as possible buyer = for EDS as the=20 firm was going through its agonies in the first half of this = decade. After=20 all, they were both based in Texas, they didn=E2=80=99t overlap, = and a tie-up=20 would have given a cash-rich Dell a platform to become a = full-service=20 corporate IT giant in the mould of IBM. Hell, it wouldn=E2=80=99t = even have had to=20 worry about pissing off its channel, as it didn=E2=80=99t have = one.

Sadly, a quick trawl through the archives doesn=E2=80=99t throw = up any pages=20 with this suggestion. All the same the companies did strike up a = cosy=20 friendship. Dell became part of EDS=E2=80=99s Agility alliance, = under which the=20 firms, together with the likes of Cisco, Microsoft and Sun, = pledged to=20 work together on R&D, procurement and customer projects. In = 2006,=20 former EDS chief operating officer Steve Schuckenbrock joined the = PC firm=20 to head up its services business.

But when it came to spending strategic amounts of cash, Dell = never made=20 the jump. It has spent the last few years buying up services=20 ~~bit~~ niche players, but doesn=E2=80=99t give the = impression of=20 being anywhere near having a coherent services proposition. At the = same=20 time, its model is not quite the dependable money-making machine = it used=20 to be. It=E2=80=99s even had to swallow its pride and solicit = dealers and=20 retailers to sell its kit.

Dell of course is a major player in plain old hardware. = It=E2=80=99s still=20 number three by revenue in the crucial server market, and number = two by=20 units. Last year its growth rate by revenue was in double digits, = ahead of=20 both IBM and HP, and suggesting it was doing some higher value = business.=20 Its unit shipments came in at 6.2 per cent, compared to 16.6 per = cent for=20 HP. But HP now has the prospect of rekitting a stack of EDS = datacentres,=20 not to mention grabbing follow-through business on EDS=E2=80=99 = services=20 contracts.

IBM set the pattern 15 years ago when it started to place = services=20 above all else, eventually ditching much of its PC business and = capping=20 things off by swallowing PwC Consulting. HP, in its own = Californian way,=20 has been following a similar path, a small digression with Compaq = apart.=20 And, of course, HP seems much more wedded to its technology = business.

Dell may well have good reasons to steer clear of EDS. It may = have been=20 wary of compromising EDS=E2=80=99 vendor independence =E2=80=93 = something that HP is going=20 to have to talk its way out of now. And as other commentators have = pointed=20 out, Schuckenbrock presumably knows where all the bodies are = buried in=20 Plano.

But if Dell still wants to be a top flight player in IT, it = surely has=20 to get serious about buying in some services expertise. Or at = least=20 finding a new heavyweight services partner. And as Kay says, how = many=20 serious world class IT services players can you name?

Either way, Dell now no longer has the option of teaming up = with the=20 guys down the road. Oh, hang on, here=E2=80=99s one that=E2=80=99s = based in Paris =E2=80=93 step=20 forward ATOS Origin! No, wait... that=E2=80=99s Paris, France, not = Paris, Texas.=20 Dammit. =C2=AE

27 comments=20 posted =E2=80=94 Post=20 a new comment

Dell=20 & EDS

Posted: 14:38 14th May 2008

Can=20 someone translate

Posted: 14:44 14th May 2008

No,=20 DAAMMIT is a CPU vendor

Posted: 14:51 14th May 2008

@Stu=20 Reeves

Posted: 15:11 14th May 2008

@C

Posted: 20:04 14th May 2008

More=20 comments=E2=80=A6

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