MNC Vendors in India – EDS-HP

Let us take a look at EDS now.

After struggling to bootstrap an India capacity for many year, EDS acquired the Indian vendor MphasiS, whose strength in business process outsourcing is formidable [EDS – India To Merge Into MphasiS]

Earlier this year, EDS was acquired by HP, creating a behemoth that could rival IBM [With EDS, HP Buys Its Way Into Outsourcing Big League].

The HP hardware lineage, combined with the EDS services lineage, combined with MphasiS’s India lineage brings this company neck-to-neck with IBM (though it still lacks the software products story of IBM).

Therein lies the problem. This is really three companies masquerading as one!

Combining these three lineages is not going to be easy and any success, at best, is bound to be patchy.

“I’ve had the good fortune to work with HP and to interact with HP people. They are unfailingly collaborative. Even when introducing themselves in class, if there is more than one of them they will unfailingly acknowledge the other, and verbally give respect to one another’s point of view. EDS, different story. Equally great people, equally strong performers, but boy oh boy is that a control culture. At classic HP, people sort of work together to figure things out. At classic EDS, you look in the book. If the answer isn’t in the book, you ask your supervisor. If your supervisor doesn’t know, there’s some process to sort things out. So I think we can anticipate some pretty hilarious (at best) and potentially distressing (at worst) moments when parties from the two cultures, each operating with their own view of the way the world works, try to come together.”

- Will HP and EDS Clash Over Culture?, Rita McGrath, Columbia Business School

Moreover, EDS has a history of at least one failed merger behind it, when it acquired A.T. Kearney in 1995 and eventually divested it in 2005:

EDS recently confirmed rumors about selling management consultancy A.T. Kearney back to Kearney leadership. The only surprise is that EDS didn’t sell sooner. Since EDS purchased A.T. Kearney in 1995, results have been disappointing. A.T. Kearney contributed less than 5% of EDS’ total revenues last year, while posting a $10 million loss. When he took the helm of EDS two years ago, CEO Michael Jordan indicated, that his primary goal was to bring the company back to basics. Because the two companies haven’t resolved their cultural differences, selling Kearney is the smart thing to do — for both firms.

- EDS And A.T. Kearney: Parting Ways?, Forrester Research, Mar 2005

I had a ring-side view of this culture clash during my association with eBreviate, an A. T. Kearney subsidiary, at the time of this messy acquisition [Shakeup Unearths Discord at EDS Auction Unit]

It is unlikely EDS-HP will ever pose a real threat to IBM.

That is not to say that EDS poses no threat to the Indian vendors.

EDS has deep service relationships with its existing customer, having taken significant ownership for the data center operations of these customers. If EDS can make its acquisition of MphasiS’s India capacity work effectively, it is positioned to offer significant cost savings to these customers.

Is EDS doing a better job with MphasiS than it did with A.T.Kearney? The jury is still out. Given its struggles with bootstrapping it’s own India operation, my take is No. While EDS has the potential to challenge the commodity play of the Indian vendors, it is unlikely to actually succeed in doing so.