HP-CSC Combo Could Shake Up IT Services

Private equity company Blackstone Group may partner with HP to acquire outsourcer CSC, according to a report on the UK IT Weekwebsite yesterday afternoon. HP would take a minority stake in the deal, according to the high tech rumor mill.

Analysts seemed to be in agreement that a deal organized such a way would be in HP’s interest, given that the company is still smarting from a less than perfect merger with Compaq. “The great thing for HP is that they get to date CSC before marrying them,” said Chad Hersh, an analyst for Celent and former CSC employee. But another observer pointed out that such an investment would be out of character for HP’s new CEO, who’s shown no appetite for broadening HP’s IT services reach or the disruption such a move would cause.

AMR Research asserted that a potential buyout of CSC by HP and Blackstone would create a fundamental shift in the global IT and business services market. Though IBM Global Services would still dwarf the combined company in services revenue, HP-CSC would nearly equal IBM in overall revenue. And, notes analyst Dana Stiffler, the new company “would have a much stronger, cohesive services portfolio,” including a “broader and deeper business process consulting practice and an extremely robust, insurance-industry-specific BPO capability.”

Stiffler says HP needs this deal or one like it to insulate its services business from commoditization that is already well underway, thanks to strong competition from offshore vendors.

–Stephanie Overby