HP's big splash on EDS all about shrinkage

Tag : butcher paper

Hurd has done some of that unromantic cost-cutting stuff too in thepast. At NCR, he discovered cruel and unusual ways to wring profitsout of various business units by cutting jobs, slashing benefitsand outsourcing work. That's not the stuff dreams are made of,unless you're really messed up or a consultant.
Once at HP, Hurd applied the same, callous hand, workingunnecessary humans out of the organization while eating into thebenefits of the remaining plebs. Again, though, where's the flair -the butcher bravado?
That, friends, comes with EDS.
A lot of people have gone to look at the EDS thing and returnedconfused. The company appears pretty damn bloated. Its financialsaren't all that spectacular. HP already has a massive servicesorganization, and, frankly, services are soooo last internet buildout.
As Robert Cringely put it ,
The goal here seems to be size for the sake of size, because itsure isn't size for the sake of profitability. This is a businesssegment, remember, that IBM has been carefully and quietly leavingfor more than a year now only to have HP jump in with both feet bypurchasing a competitor less profitable at this stuff than IBM. Theresult will be a bigger business for HP that returns lower profitmargins, which makes no sense to me.
I wonder what would happen to an outfit like HP Services if thecompany just decided to forget about acquisitions and simply invest$12+ billion in their current operation? Heck, half the people working right now in HP Services probablyworked at some point in their careers for EDS (or IBM). What DNA isHP acquiring here that they don't have already? [Emphasis added]
I happen to believe that Cringely and others have missed the realangle here. EDS will, in fact, fit into one of the most cunningcorporate IT plays we've seen in years. It's a play that centers oncost-cutting. And it's a play that - get this - centers on beinguseful. (Sacrilege in the services game, I know.)
Here's the deal. Hurd The Butcher
HP has been going on about its data center reduction for awhile.The company wants to shrink 85 data centers, thousands of serversand thousands of applications down to six mega computing facilitieswith more manageable amounts of stuff. It's pretty damn proud ofthis operation. See for yourself .
HP's well underway with this program, and will be selling itself asa model of consolidation soon enough. "This is what we learned.Follow us to the promised land."
How much stronger does such a story get after HP digests and thenconsolidates EDS too?
Good lord, y'all. Can you imagine the synerorgy that takes placewhen you throw 20,000 or so services people at a mass consolidationand make them fight to keep their jobs by coming up with thingsthat actually work? I'm talking a battle to death around efficientdata center design. The loser gets choked with fistfuls of freedoughnuts and has scalding hot coffee poured on his groin.
Then the real genius kicks in a couple years down the road when theEDS consolidation is done, and HP can prove that its tortureditself twice. It will claim to know all the ins and outs behind theshrinkage process, and it will have more services people than youcan imagine ready to help others with similar efforts. Andthroughout the whole process, HP learns how to kick out SunMicrosystems, Dell and Cisco gear with as much efficiency aspossible.
Cringely wondered how HP buying EDS was better than just throwing$12bn more at HP services. Well, that's how it's better. HP has apretty damn thorough story to tell - a consolidation tale thatinvolves two of technology's biggest names. From a pure marketingperspective, IBM doesn't have a line to beat that. IBM looks likeit's doing the same old thing.