CSC ties with HP Enterprises' services to create new IT powerhouse

BENGALURU: The merger between HP Enterprises' (HPE's) services business and Nasdaq-listed Computer Sciences Corporation ( CSC) will create a pure-play IT services powerhouse with outsourcing revenues higher than that of Accenture's (without its consulting business) and one that will be better positioned to compete against the formidable Indian IT companies.

The new entity is expected to have $26 billion in combined revenues -that includes CSC's $8 billion and HP Enterprise's $18 billion services business. And over 40 per cent of the workforce of the combined entity will be based out of India (about 55,000 employees, including HP India's 30,000 and CSC India's 25,000).

Peter Bendor-Samuel, CEO of US-based Everest Research, said the merger makes sense for both sides, allowing HP to exit a shrinking and troubled space while CSC can build scale and wring profits from the same space.

For CSC, the architect of the deal is Mike Lawrie, the chairman, president and CEO who has dramatically turned around CSC since he took over in 2012.

But some analysts are cautious.

"HP , to put it mildly, has bungled previous attempts at amalgamating large acquisitions such as the EDS integration which resulted in lost customers and talent, and wiped out a large chunk of business that almost collapsed the services business," said Hansa Iyengar, IT analyst in London-based Ovum Research.