April 3rd saw the long-anticipated creation of a new IT and BPO powerhouse service provider – DXC.technology. However, DXC’s challenges represent a microcosm of a services industry in perilous transition.
This is a crucial event in the services industry, not only because it isn’t often a “new” $25 Billion services firm is created, but because of what it signifies about the uncertain state of the current market and the huge challenges facing service providers in the near future.
Read our complimentary analysis of the merger on the HfS Research website by clicking here.
Posted in : IT Outsourcing / IT Services
This was a great analysis. Not necessarily new in your case, but I specially liked the independent point of view reflected in this article [… among other things, questioning the strategy of a $20B company who is a pottential prospect for HfS]. Thank you for always keeping us well informed along with the whole truth and pragmatism of your analysis 😉
Appears to me that the key part of the value proposition is really financial engineering to get the costs lowered and optimized. I see limited growth and innovation based on capabilities or innovative strategies. Thus after a few quarters of cost cutting, there is hope “that a miracle” of growth and success will materialize…..
I believe the challenges are several. The services model is highly price sensitive at the enterprise level, the SMB sector tolerate change orders and has limited follow on revenue, and digital is open systems based driving up integration while driving down price points. Debt loaded companies and traditional thinking puts players behind the 8 ball. Lot of fan fare, 3 quarters will tell the story on leadership ability.
The infrastructure led advantage of these firms is eroding by the day as the humongous multi-year contracts, such as SSBA at DWP in the UK public sector, are nearing their end, beyond which they won’t be redone in the same traditional sense that prevailed for more than a decade. With digitization and infrastructure moving into shared clouds, you’re talking about big serious correction in overall revenue for these firms in next 2-5 years.
@Gesner Filoso – thanks for the kind words. Having read the sycophantic overtones of some legacy analysts keen to renew their paid relationships with their former HP and CSC clients, someone had to just call a spade a spade with this one… I believe we’ve highlighted both the positive aspects and challenges of the merger here and tied this to reality, as opposed to living in the past where people still think those mammoth IT services deals will eventually resurface with some sort of “digital” frosting….