EDS CIO: HP-Compaq Combination Has Huge Cultural Obstacles

EDS

"They can justify the finances all they want at the top, but I think they have got a fundamental cultural conflict between two huge firms that work differently," said Milholland in an interview with CRN. "It's not a complimentary product line issue. They may very well have great complimentary product lines. To me it's a culture issue."

The IT integration issues will pose massive problems for the new combined company, said Milholland, who managed Boeing's IT effort when the aerospace giant merged with McDonnell Douglas.

"If I was IBM, I'd be hoping the merger goes through," he added. "It is in their best interest."

HP has smart executives who will eventually get the integration right, but competitors will be moving quickly to gain competitive advantage, he said.

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"Compaq never integrated Digital (Equipment Corp.) into their company and now they are going to combine with HP," said Milholland of the potential HP-Compaq deal, which is the subject of bitter proxy fight.

Major computer vendors such as HP and Compaq are trying to increase their services revenue, but EDS rarely goes up against them, EDS executives said. "All the companies want to get into it, but it takes more than just a desire as all these boutique firms (that went out of business) found out," said Milholland. He personally feels that if Hewlett Packard was able to acquire PWC, they would have had a better chance of getting a piece of the services pie, he said.

That said, IBM and EDS both grew their business by growing it internally rather than through acquisitions, noted Milholland.