Cultural and technical integration remains a challenge for HP: experts

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Thursday , May 15, 2008 at 2315 hrs As global IT player Hewlett-Packard (HP) takes over Electronic Data Systems (EDS) for $13.9 billion, experts in the industry are clearly concerned over the synergy of the two giants. EDS and HP have largely different cultures, s EDS largely looks into products maturity, replicable transformation solutions, and scalable delivery methods. While on the other hand, HP's core still resides in the legend of 'the garage' in Palo Alto, where its founders turned engineering acumen into a global business.

Pradeep Udhas, head - markets, KPMG, says, "It's a huge acquisition and the integration of the companies will be a big challenge, as both of them have quite a different culture." Interestingly, industry observers feel that if HP overcomes the cultural challenges, it will give significant scale to HP services and the company will become much more competitive against IBM. The combined entity will have services in hardware, software, services, BPO, and R&D. EDS has a presence in about 70 countries and has one of the most robust service delivery engines in the business. Udhas adds, "Globally, EDS has a huge number of government clients, especially in the US. HP will now be able to leverage on these existing clients."

On the technical challenges faced by the duo, Paul Roehrig, principal analyst, Forrestor, says, "IBM has significant strength in applications outsourcing and operations consulting. For the infrastructure and application business, IBM still has about $10 billion more revenue per year than the combined HP/EDS. HP will have to strengthen other offerings to fully leverage the investment."

Will the HP move influence other players to consolidate is a bigger question in the industry. Harit Shah, analyst, Angel Broking, says, "There is a lot of fragmentation in the industry and there is a possibility that further consolidations can happen." Roehrig adds "India-based firms continue to mature and the Accenture business model-with consulting, project work, and annuity-revenue IT services business will be replicated by competitors.