(Image source: HPE.)
CSC has announced that its board of directors has unanimously approved a plan to merge with the Enterprise Services segment of Hewlett Packard Enterprise (HPE) to create what the company characterizes as a pure-play global IT services company uniquely positioned to lead clients on their digital transformations. The combined company will create one of the world’s largest pure-play IT services companies, with more than 5,000 clients in 70 countries and annual revenues of $26 billion.
The merger announcement follows CSC’s separation into two publicly traded companies, CSC, which serves commercial and government clients globally, and CSRA, which serves public sector clients in the U.S. CSC also recently acquired Xchanging Plc, a U.K.-based provider of insurance software and business process services, creating the largest provider of core insurance solutions globally.
Following completion of the merger, which is expected to close by the end of March 2017, CSC CEO Mike Lawrie will become chairman, president and CEO of the new company. Meg Whitman, president and CEO of HPE, will join the new company’s board of directors, whose membership will include equal numbers from both companies.
“Our proposed merger with HPE Enterprise Services is a logical next step in CSC’s transformation,” comments Lawrie. “As a more powerful and versatile global technology services business, the new company will be well positioned to innovate, compete and serve clients in a rapidly changing marketplace. We are excited by the great potential this merger brings to our people, clients, partners and investors, and by the opportunity to strengthen our relationship and collaboration with HPE.”
Serving Clients More Efficiently and Effectively
CSC touts the merger as bringing complementary capabilities together to increase scale and serve clients more efficiently and effectively worldwide. The vendor describes the benefits of the merger to clients as follows:
- World-class strength in customer service and IT operation: among the “safest pair of hands” in the industry, deploying a broader set of resources and expertise to benefit clients;
- Market-leading industry and technology expertise: industry-leading experience and IP in areas such as financial services, healthcare and life sciences, transportation, consumer products, and insurance, helping customers transform faster;
- Global scale: operating 85 delivery centers and 95 data centers across 70 countries, providing access to the most efficient IT services in the world;
- Technology independence and best-in-class capabilities in next-generation cloud, security, application development and modernization, big data and analytics, mobility, workplace, and sophisticated business process and IT services;
- Combined leadership bringing deep turnaround experience and transformation capabilities, customer relationships, sales/GTM, industry and functional expertise;
- Expanded best-of-breed technology partnerships that provide greater choice of solutions; and
- Enhanced innovation, R&D, and investment opportunities for new services and solutions.
HP and CSC both have a strong base in financial services and a broad set of software and service offerings for insurance, notes Tom Scales, Research Director, Celent (Boston). “The combination of the two organizations should allow them to service that base even more effectively,” Scales comments. “Key to the success of this merger will be their joint ability to combine their offerings into a larger package of solutions to meet the rapidly changing needs of the industry.”
Transaction Not Insurance-Driven
While both companies serve many insurers and own insurer software assets, the transaction was driven by more horizontal industry considerations, suggests Matthew Josefowicz, CEO, Novarica (Boston). “This transaction is more about both companies strengthening their core competencies—enterprise technology and IT outsourcing and services respectively,” he comments.
Whatever the importance of insurance considerations, the merger announcement is only the beginning of realizing the potential benefits, cautions Donald Light, Research Director, Celent. “Bringing the two organizations together, including professional services, account management, sales, marketing, and more, will have its own challenges as well,” he elaborates. “The key test will be retaining the customer bases of each organization.”