The IBM Channel Sounds Off On The HP-EDS Deal6:00 PM EST Fri. May. 23, 2008
Channel reaction to the Hewlett-Packard-EDS deal runs the gamut. IBM should be very worried about the impact to its services business of HP's pending acquisition of EDS, according to a solution provider close to both vendors, but another source close to IBM said that the acquisition will do HP more harm than good.
From a purely business perspective, HP is buying last year's service model, the source close to IBM said. "I can't believe they bought such a U.S.-centric model," he said. "Today, it's a global world. Sam Palmisano [IBM's chairman, president and CEO] talks about the importance of thinking globally. EDS is very U.S.-centric."
That source also said it is very difficult to integrate a services company. "HP essentially is buying one of the largest VARs, one that is also an IBM partner," he said. "HP focuses on its own services. EDS says it won't sell only one vendor's products. That's a big challenge to integrate."
HP also prides itself on its own technology, which will lead to an internal conflict with EDS' multivendor culture, the source said.
As a result, HP's solution providers have to be concerned on a couple of fronts, the source said. For instance, while HP gets a large VAR, the move does nothing to add to HP's system business, on which it depends. Also, the source said, HP's CEO Mark Hurd is on record saying that HP plays in markets where EDS does not, potentially leading to market segmentation and draining the market's margins rather than giving economies of scale.
The source said that IBM with IBM Global Services has the largest services business in the world. However, he said, there was a big difference in how IBM and HP got into the services business.
"IBM had a services business before it had a channel," he said. "HP has a channel before it has services. ... [IBM] had to go through a lot of the conflicts and challenges already, but [their] partners recognize that IGS can be a partner with them."
The solution provider that partners with both IBM and HP agreed that HP could easily make a mess of the acquisition.
"HP has every potential of screwing this up," he said. "But if HP can execute, it will mean a dramatic drop in prices for services across the board. But that's a big 'if.' "
EDS is a value services provider, while HP is a volume product company, the solution provider said. "Where do they intersect?" he said. "How did IBM become a value player? They got rid of volume products. If HP did that, they'd go out of business."
However, the solution provider said, IBM has been trying to change its services model with the channel, while HP has been rising with the channel. "If HP can make this work, it will be a serious impact on IBM," he said.
IBM does not know how to do services with the channel, the solution provider said. "Right now, IBM only offers repeatable services like installation," he said. "They've pulled back on their value services."