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But working out the channel issues could be a challenge. Mont Phelps, president and CEO of NWN Corp., a Waltham, Mass., HP solution provider, noted that the EDS/HP merger creates an IBM look-alike. "If they are modeling themselves after IBM, IBM has not been the greatest partner; they tend to step on us," he said.
He said that today he sees little competition from EDS, but notes that he does bring HP services organization into some of his accounts as an enterprise services partner. As EDS morphs into HP's services organization and solution providers tap EDS' services resources, he's concerned about bringing a potential competitor into his accounts.
Other solution providers shared his concerns. Don Richie, CEO of Sequel Data Systems Inc., an HP enterprise solution provider in Austin, Texas, noted that EDS sells products as well as services, creating a potential conflict with HP's existing VARs. "Partners need to hold on to their seats and guard their customers," he said. "I guess now HP is a full-fledged VAR [with the EDS acquisition]. We will keep doing what we do best, but this certainly is not good news for the partner community."
EDS's Rittenmeyer noted that EDS would complement HP's services business. "The overlap [in customers is] not very extensive," he said. "We have customers in the same space, but those are few and far between. From our point of view, we will continue to offer the best solutions for the best value. HP is a part of that and they will continue to be part of that. They will add to our portfolio from a technology standpoint."
HP's acquisition of EDS is expected to close in the second half of calendar 2008 and to more than double HP's services revenue, which was $16.6 billion in fiscal 2007. The combined services businesses at the end of each company's fiscal 2007 amounted to $38 billion, with 210,000 employees doing business in 80 countries, Hurd said in the conference call.
Once the acquisition is complete, the new company will be branded EDS—an HP company. EDS will remain headquartered in Plano, Texas and EDS CEO Rittenmeyer will head the new organization and report to Hurd.
The outsourcing business within HP's Technology Solutions Group, head by Ann Livermore, will move over to EDS, Hurd said.
Livermore will retain responsibility of HP's enterprise servers and storage, software and technology services, which consist primarily of break-fix, Hurd said.
Hurd noted that EDS would be a multivendor services organization and not just focus on HP technology. "In HP services today we work with all kinds of different customers' IT infrastructure," he said. "In the services industry, you have to able to work with all infrastructures in customers' IT architecture and it's is pretty disparate. There is no real change in that perspective."
Meanwhile, HP's strategy to move more midmarket customers over to solution providers could mesh well with a potential EDS acquisition that would strengthen HP in enterprise services.
HP said last month that it is about a third of the way toward its goal of migrating 750 midmarket direct maintenance contracts over to solution providers and expects to complete the transition by year's end.
Referred to internally as the Atlantic Project, the plan called for HP to turn over in excess of $25 million worth of HP direct maintenance contracts in midmarket accounts to the channel in hopes that solution providers could better serve the customers.
"Most of these customers' only relationship with HP was the maintenance contract," said Jo Ann Redding, vice president, HP services sales for channel partner accounts.
"There was really not anyone selling to them," she said. "[By turning these accounts over to the channel] this will give us better coverage in products and solutions."
"So far in the last four months we've seen about 12 opportunities [maintenance contracts] come our way in excess of $1 million," said Marc Sarazin, executive vice president of sales and marketing at AdviseX Technologies LLC, an HP solution provider in Independence, Ohio.
Mark Melillo of Melillo Consulting added that the acquisition of EDS could end up being good for solution providers because it strengthens the HP brand in services. "But it all depends on how they execute," he said.