EDS and HP Unions : already working together in France

May 20th : hundreds of EDS France employees on strike to fight back WFR and site closures, HP France Unions were there. Same day : IBM France also on strike, for salaries.

HP-EDS merger could lead to services job cuts

"We're looking to streamline our overhead," Shane Robison, HP's chief strategy officer says.

Research and consulting firm Technology Business Research Inc. is predicting fairly substantial cuts. The firm noted that H-P's services division and EDS will have a combined headcount of about 209,000 workers. "The addition of EDS will be a drag on [H-P's service] margins, and CEO Hurd will be aggressively targeting efficiencies," the research firm said in a note. "TBR expects that initial headcount reductions will be at least 10% to 15% of the combined headcount."That would mean 20,000 job cuts or more, although the consulting firm didn't speculate on how those cuts would be divided between EDS and H-P employees.

HP to buy EDS for $13 billion-plus; biggest HP deal since Compaq purchase

Three obstacles that HP and EDS will need to overcome in order for the deal to succeed :

1/Go global : U.S information-technology services companies are in a period of upheaval right now due to the emergence of companies in countries like India that can do a lot of the same work at a cheaper price. IBM and Accenture have both adapted to the new global marketplace, adding staff around the world. EDS and H-P have been slower to globalize. In order for the combined company to substantially improve its margins and win customers looking to cut costs, it will need to shift more work overseas.

2/ Vendor independence : one of EDS's hallmarks was that it didn't have a vested interest in selling its customers software and hardware from any one tech vendor. That independence is now gone: Even if H-P services tries to position itself as vendor agnostic, customers will still be suspicious every time they receive a recommendation for H-P equipment. One mitigating factor: The PCs and other tech equipment H-P sells is fast becoming a commodity. H-P CEO Mark Hurd could be betting that in a few years businesses won't care what company they buy this equipment from because it will all be the same.

3/ Culture clash : forget about how well EDS's suit-wearing consultants will fit in California. The bigger culture clash is between a product-centered company, H-P, and one focused on operations, EDS. Of course, the combined company will be so large and operate in so many different places that it's hard to imagine these legacies mattering as much as, say, how the new company adapts to the various cultures around the world it is sure to expand into.

Source : Peter Allen, a partner at the outsourcing-advisory firm TPI.