The EDS and HP merger will topple Gen-i from its perch as New Zealand’s largest IT services provider, with the merged organisation having a $40-million lead over its nearest rival.
This is according to figures by research firm IDC, which show the combined services business would have revenues close to $460 million based on 2007 figures. Gen-i’s total services revenues in 2007 were $423.61 million.
“Based on 2007 performance, there would be a $40 million difference in revenues between Gen-i and HP/EDS. The difference would be fairly significant,” says Jenna Griffin, IDC’s senior services market analyst for Asia Pacific.
Griffin confirms the new business would bump Gen-i from the number one services slot. In 2007, Gen-i held 12.5 percent of the local services market, while EDS was in second place with 10.1 percent. HP’s fifth-ranked market share was 3.6 percent.
HP announced plans to acquire EDS for US$13.9 billion (NZ$16.7b) earlier this month. The company says it will integrate HP’s services and outsourcing operations into EDS, which will be run as a separate unit, with its own management team.
Although the merger would create a super-sized services provider, Griffin expects little impact on local rivals. “In terms of competitors we won’t see that much impact. Apart from [work done for] Fonterra, HP and EDS don’t cross paths much.”
Gen-i CEO Chris Quin says a merged HP/EDS would rival his company in IT services, but would be smaller than its total IT and telecommunications business. He says it is in this converged services space that Gen-i is experiencing the most client demand.
Quin adds he prefers client perception and growth rates as measures of success over market share. “According to IDC, we are the most preferred IT company in New Zealand. We also grew faster than any of the other top five IT services providers over the past three years.”
Gen-i will continue to offer the broadest range of IT and telecommunications services and solutions in Australasia, Quin says.
Its trans-Tasman capabilities will also remain an advantage, he says, adding HP will continue to be a valued hardware partner of Gen-i’s.
CEO of rival integrator Axon, Scott Green, says it doesn’t see itself as a major EDS competitor and that HP’s EDS buy should see them compete more effectively in global outsourcing, rather than in Axon’s target market.
“I can see a lot of logic in what [HP is] doing in terms of where they want to be in the global outsourcing market. We don’t compete in the global outsource market.”
Axon’s “sweet spot” is providing services for commercial firms with between 200 and 2000 seats, says Green, adding it sees EDS’ core market as those with 6000 to 10,000 seats, the large enterprise space. “That’s where HP should be playing as well.”
Green says Axon doesn’t provide services to EDS’ customer base, which includes Fonterra, Telecom, government agencies and the local businesses of multinationals – or only provides services to them where EDS chooses not to.
He says having the biggest market share shouldn’t be the defining measure of success for services firms, saying it is more important to grow your business through profitability, customer satisfaction, fair prices and well-delivered services.
IDC’s Griffin says if the integration of HP and EDS goes well, there will be minimal impact on current EDS and HP customers. But if it goes wrong or drags on, it would generate a range of opportunities for rivals, she says.
Any potential fallout could come about only once larger HP and EDS contracts are up for renewal, says Griffin.
With more than 2200 staff, EDS is the largest IT employer in the country and the merger with HP Services is bound to result in additional resources that could be used to address areas neither company has been strong in to date, says Griffin.