EDS Now HP, Infosys Buys Axon

Last week Hewlett-Packard Co. (HP) completed its acquisition of Electronic Data Systems Corp. (EDS). In other buyout news, Infosys Technologies Ltd. announced it was purchasing Axon Group of the UK.

Focal Points:

• HP reported its acquisition of EDS closed last week. The deal was valued at $13.9 billion. EDS' annual revenues last year exceeded $38 billion. EDS's 210,000 employees have joined HP's consulting workforce. The new business group, EDS, an HP company, will be led by Ron Rittenmeyer, president and chief executive officer, who had served as EDS' chairman, president and CEO. It remains based in Plano, Texas. HP's Technology Solutions Group (TSG) will shift its outsourcing services operations to EDS, as well as portions of its consulting and integration services unit. According to HP, the portions of Consulting and Integration (C&I) that deal with "industry standard" services, such as SAP AG and Oracle Corp. related services, will shift to EDS's consulting group. C&I capabilities that are embedded with specific HP products and solutions will remain part of the TSG business group.
• The EDS leadership team will consist mostly of executives that served in similar roles at EDS prior to the acquisition. There are nine executives that will report directly into the president. Seven of the nine remain unchanged. Andy Mattes, who was senior VP for HP Outsourcing Services, will now be the EDS senior VP for Application Services. Joe Eazor, who headed EDS' corporate strategy and business development, will now be senior VP of transformation. The other seven executives are Michael Coomer, Bobby Grisham, Jeff Kelly, Mike Koehler, Maureen McCaffrey, Dennis Stolkey, and Bill Thomas. A team of about 500 people worked on the EDS integration plan which will be rolled out over the next 12 to 18 months.  
• Infosys stated it was buying the UK-based Axon Group for $753.1 million in a cash offer. Axon is a global integrator of SAP software and is focused on business transformation integration services. Its revenues for the past six months grew 28 percent to $223 million. Last year Axon had profits of $37.4 million on revenues of $378.3 million while Infosys posted sales of $4.2 billion in its prior fiscal year which ended in March. Axon has approximately 2,000 employees in its SAP consulting practice. Infosys has a large Oracle consulting proactive, with approximately 3,500 consultants; its SAP practice is much smaller. Axon also has expertise in chemicals, high technology manufacturing, travel, and utilities industries. The deal is expected to close in November of this year.

Experton Group believes consolidation in the consulting services business will remain strong, as consultants, integrators, and outsourcers seek to gain economies of scale, improve penetration into key markets, and offset changing buying patterns and economic conditions.  HP states its top priority is providing continuity of service during the integration without a decline in service delivery or quality. Given the scope of the restructuring challenge and the potential for staff reductions, Experton Group is of the belief that some executives will find HP will experience problems and the vendor will not meet expectations. The Axon acquisition is a good move for Infosys and will help improve its independence by positioning itself as a quality integrator for both Oracle and SAP software lines. However, integrating Axon into the Infosys culture and model will take time and it may take more than 12 to 15 months before synergies become apparent. IT executives that intend to work or are working with either company's consulting arms should understand the current roadmap and strategies, and ensure critical resources remain committed and contract commitments are not impacted.