HP-EDS: What More Industry Consolidation Means for IT

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I'll leave it to the day-job journalists to get the whole story after the press conference. And I'll comment about this event on my IT investment research site after the SEC documentation comes out (that's where the good data is sometimes hidden). But May 13th's HP and EDS announcement that the two companies have signed a definitive agreement under which HP will purchase EDS is maybe more meaningful to IT planning than all of IBM's software acquisitions, Oracle/BEA and SAP/Business Objects were (and even Microsoft/Yahoo will be, if it ever happens).


That's because the software market consolidation comes in a highly fragmented market that needed consolidation from an economic point of view to achieve economies of scale beneficial to "consumers" (which in this case means you guys in the IT lab). On the other hand, the systems and systems integration markets had already consolidated. The fact that the two markets appear to getting ready to consolidate even further with each other can only mean planning on less choice and higher prices.


According to the press release, "the companies' collective services businesses... had annual revenues of more than $38 billion and 210,000 employees, doing business in more than 80 countries." HP intends to establish a new business group, to be branded "EDS - an HP company," but that agreement is unlikely to last longer than the tenure of current HP and EDS executives.


The two companies have numerous overlapping and competitive partnerships to work out and will need to normalize different technology/architecture strategies (such as in lifecycle management, service-oriented architecture and ERP).


Details at 11. Hold on to your wallets.