HP layoffs final chapter in EDS integration

The news of 9,000 layoffs in the next couple of years at Hewlett-Packard Co. are part of the company’s enterprise services strategy as well as the final chapter of its integration with outsourcer EDS purchased in 2008, said one analyst.

The Palo-Alto, Calif.-based company bought EDS for US$13.9 billion and have since integrated more than 100,000 employees, closed about 200 office sites and retired 400 applications, said Sebastien Ruest, vice-president for services research with Toronto-based IDC Canada Ltd. “The plan is really to leverage the HP technology and leadership they have, to manage the sales coverage, to expand the global delivery and take advantage of the EDS environment,” said Ruest.

HP’s enterprise services strategy – based on its vision of a converged infrastructure and “environment-as-a-service” – is all about automating and modernizing service delivery, said Ruest. “HP is really big on that industrialization model,” he said. “All these tasks done by individuals are now being done by machines per say.”

HP has already consolidated about 200 of its “old” data centres and created new infrastructure services in its place, said Ruest. The elimination of 9,000 employees are specific positions related to the type of infrastructure services and data centres HP used to provide, he added.

HP at this time is not saying how the job cuts will impact Canadian operations, but Ruest estimates a “fairly modest” one to three per cent job loss in Canada.

The difference in Canada is that there is no surplus of capacity, said Ruest, so there never were massive data centres that then had to be consolidated. The sole duplications for HP in Canada are the large global contracts with a delivery component, he added.

HP plans to hire about 6,000 employees in the next couple of years in sales and delivery. “With these modern data centres, they are moving people who have specialization in these new technologies in these new environments,” said Ruest.

With this restructuring, Ruest doesn’t think it’s an attempt by HP to catch up to Armonk, New York-based IBM Corp., considering the few areas of overlap. Ruest said HP, although “now equal or in some cases larger (than) IBM in terms of revenue” tends to choose wisely the markets in which it toils. The infrastructure layer – servers, storage, desktops, printers, and the management of all that – is what distinguishes HP, he said.

Follow Kathleen Lau on Twitter: @KathleenLau

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