Why Dell’s Perot deal doesn’t necessarily mean CGI’s next

Tomorrow morning at 8:35 a.m., in the Fairmount Queen Elizabeth Hotel in Montreal, CGI president Michael Roach will take the stage at CIBC’s 8th Annual Eastern Institutional Investor Conference and try to explain why his firm is not the next Perot Systems.

Following Dell’s US$3.9 billion purchase of Perot Systems this week, speculation quickly turned around the fate of Canada’s largest and best-known IT services company. The Globe and Mail quoted analysts who suggested Cisco, Microsoft and IBM could be among the potential suitors to take over CGI, which has never come close to looking interested in being acquired and instead has been completely open and transparent about making more deals of its own. Roach told the Globe as much, boasting CGI can afford to spend $2 billion on firms in the U.S. and Europe.

There is every reason to believe CGI is going to remain consistent with its business plan, even as the major OEMs have been dragged kicking and screaming by market conditions to alter theirs. HP had a services organization long before its EDS deal, but it was dwarfed by IBM. Dell, which has also been talking half-heartedly about enterprise services for years, was starting to lack credibility when compared with its counterparts. Now there’s a big three of sorts, but IBM is probably still the market leader, at least until HP and Dell smoothly work out the integration issues associated with their respective megadeals.

Microsoft, meanwhile, will not buy CGI. The existing OEMs can do more than enough to ensure its technologies are a focal point within large enterprises, and its has an extensive channel to take care of the mid-market and SMB. Cisco, likewise, will not buy CGI, which is more than a network specialist and focuses on areas in which Cisco would have little interest. IBM would buy CGI only if it commanded a share of the client base that it can’t reach on its own, and that’s unlikely.

It’s interesting that no many people are talking about the remaining players on the IT services scene, whether it be Computer Sciences Corp. (a firm which, a few years ago, looked set to be bought), or even something like Lockheed Martin, which has a substantial amount of talent and resources in IT integration. A few years ago, I would have said GE Capital would have been a worthy target for any number of vendors, but has since become part of Compucom, which would also hold some significant integration expertise.

The vendor no one seems to be mentioning, meanwhile, is Oracle, which is weird. This is a firm hell-bent on acting as the industry consolidator, to the point where its product line is so vast and customer choices so complex you would think a good IT services arm would help drive its go-to-market strategy. Maybe after all its wheeling and dealing Oracle can’t afford a CGI. But it’s starting to look like no one can afford to go without an IT services offering for long.

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