EDS termination HP's loss

commentary Hewlett-Packard's contemptuous termination of the 47-year-old EDS brand in a five-paragraph statement filled with marketing spin is a colossal mistake and one the company will live to regret.
Written by Renai LeMay, Contributor

commentary Hewlett-Packard's contemptuous termination of the 47-year-old EDS brand in a five-paragraph statement filled with marketing hogwash two weeks ago sends one clear message to the world.

In plain English, it reads: "We don't understand what we paid US$13.9 billion for."

No IT professional in their right mind could possibly believe that the meaningless title "HP Enterprise Services" could have more weight in the highly competitive IT services market than the enduring and powerful Electronic Data Systems brand created by the company's founder Ross Perot back in 1962.

Does this remind anyone else of those IBM divisions who nobody can keep straight? Global technology whatsit? Systems and technology hoohah? What is this, a battle of the incomprehensible division names?

I'm not a marketing expert, but it seems to me that when a company spends 47 years almost single-handedly defining the IT outsourcing market, it's earned some credibility in the minds of its customers. And it's earned the right to keep that name and not be morphed into a division of a company whose primary brand association in the market is with desktop PCs (and these days, laptops).

As industry commentator Mark Mayo pointed out, "EDS pretty much founded the outsourcing industry and that name is very well known. It's definitely a loss...truly a watershed event."

You can imagine the reaction as 10,000 former EDS salespeople call their clients over the next year. "You're from where? HP what? Oh ... right. You mean EDS! Why didn't you say so?"

But if you've been watching the fallout from HP's EDS buyout as closely as I have over the past year, the move will make sense as just one in a long chain of signals that HP does not fundamentally understand the beast that it has brought into its den.

The first sign of trouble was the news that HP would chop about 24,600 jobs, or 7.5 percent of its total combined workforce following the acquisition, a move that flowed through to the pair's Australian operation, which at that stage held around 6,000 workers. The cuts immediately knocked out around 75 Australian staff, although nobody outside the company knows for sure how deep they eventually went.

The move on its own was expected and legitimate. But HP's attitude towards the cuts revealed the depth of its ignorance about EDS' nature.

EDS Australia managers were frantic with stress at the time, due to the fact that they were not allowed to disclose specific details of the move to the teams they had painstakingly built up locally over the past decade, sometimes poaching staff from rival outsourcers to do so.

The stress built to a level where a sacked EDS Australia worker attempted suicide in November after learning of his retrenchment--a situation which resulted in dozens of EDS staff detailing their displeasure with the plans on the forums of ZDNet Asia's sister site, ZDNet Australia, among other sites.

Then there was the fact that HP did not appear to have made the normal overtures to the unions representing EDS' highly unionized and structured workforce, either in Australia or in the United Kingdom.

Those with long memories will consider this outrageous given the long-running union disputes within EDS half a decade ago and even before. As outrageous even, as Telstra's disdain for dealing with unions before its new CEO David Thodey extended the olive branch.

Lastly, there is the move to combine the EDS business with HP's existing division selling hardware into business and government, under the "HP Enterprise Business" label announced today.

This move smells strongly of an attempt by HP to focus the EDS business on selling and maintaining HP's own hardware, rather than the more vendor-agnostic approach EDS has taken previously. If you were to go back several years, EDS staff would have no problems inking managed desktop services deals including hardware from IBM, Dell and even smaller groups like Toshiba.

But will this still continue to be the case, or will a long line of IT managers start to complain that EDS only likes to admin HP kit?

There's one central truth at the heart of HP's fundamental EDS disconnect. At it's heart, HP is simply not a services organization. It is a manufacturing company. Its business has thus far been built on creating and selling technology, not on human capital.

In contrast, EDS is a services group dependent on hiring and retaining human talent--people, not machines or IT systems. If you've been around the block in the IT industry, you will have seen this problem before many times.

It was the reason that Telstra could never quite understand the IT services business Kaz which it virtually destroyed in an attempt to mold it to the telco model, and it's the reason Dell's services business never really broke into the IT services market and ended up buying Ross Perot's other IT services group this week.

But that doesn't excuse HP's behavior during the EDS acquisition, nor will it save it from its own hubris.

And EDS' staff will certainly never forgive their new masters for their arrogant destruction of a brand that rivaled HP's own--a move that was not an honest battle between equals on the field of war, but was in fact a silent blade slipped into an unsuspecting back in the quiet of night.

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