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HPE To Spin Out Its Huge Services Business, Merge It With CSC (cio.com)
itwbennett writes from a report via CIO: Hewlett-Packard Enterprise announced Tuesday that it will spin off its enterprise services business and merge it with IT services company Computer Sciences Corp. (CSC) to create a company with $26 billion in annual revenue. The services business "accounts for roughly 100,000 employees, or two-thirds of the Silicon Valley giant's workforce," according to the Wall Street Journal. In a statement, HPE CEO Meg Whitman said customers would benefit from a "stronger, more versatile services business, better able to innovate and adapt to an ever-changing technology landscape." Layoffs were not a topic of discussion in Tuesday's announcement, but HPE did say last year they would cut 33,000 jobs by 2018, in addition to the 55,000 job cuts it had already announced. The company also split into two last year, betting that the smaller parts will be nimbler and more able to reverse four years of declining sales.
I come from one of those hippie countries with socialized healthcare, and doctors' income is usually not really a concern here.
Doctor's income has very little to do with the skyrocketing cost of health care here in the US. In fact a huge portion of doctors don't actually have take home pay much different than a well paid software engineer. An internal medicine doctor in solo practice can work 70-100 hours per week and maybe take home $80-150K/year when all is said and done. Other doctors do better financially (particularly specialists) but the big drivers for health care costs are demonstrably not doctor's salaries. Those doctors who do make bigger salaries tend to be economically far more valuable than their take home pay.
The big drivers of cost (in no particular order) are perverse treatment incentives relating to insurance, high drug costs, uncontrolled hospital billing, ridiculous administrative burden, lack of modern and interconnected computer systems, fraud, lack of a single payer entity, torts and actions to protect from torts, overuse of expensive medical equipment, and a few other things. Salaries of staff is a consideration too but it's not even in the top 10 problems driving health care costs. In fact there is a shortage of adequately trained staff in many parts of the country.
What we did was kicking frivolous lawsuits out of the window where you could sue a hospital for a few billions based on "mental anguish" or similar bullshit, lowering their insurance bills and enabling them to provide FAR cheaper rates.
And what do you do when you really do get screwed by an incompetent hospital? I'm quite sure that happens just as often as it does here in the US. What is your recourse when something goes horribly wrong?
We also made a distinction between necessary and elective treatment. Reattaching a severed finger is necessary. Moving your nose a few inches up because you think it's not pretty enough is not. The former is paid by your insurance, the latter not.
That is no different in the US. Elective cosmetic surgery is rarely covered by insurance except for cases related to reconstruction following an accident or serious illness. Your botox injection will not be covered by any insurance that I am aware of. My wife is a physician in a dermatology practice and they make a ton of money from elective cosmetic procedures not covered by insurance. (Vanity literally has a price)
And finally we got free routine check ups, the older you get the more frequent they get.
They're not free. You just pay for them with tax dollars instead of insurance premiums. I agree that they are a good idea and I think the US does it in a retarded way but let's not pretend it's free just because you didn't get presented with a bill when you left the office.
This seems like a pure financial engineering transaction, but I wonder about the long term health of "IT Services" firms like CSC. I have worked both on the services and the "serviced" side doing various tasks over the years. The services firms cut every single corner they can to provide just enough service to avoid losing their contract; it's frustrating not being allowed to do something for a customer because it might make us less money but be more efficient. The companies hiring them use them as an excuse to wash their hands of anything IT related, dump staff, etc. without having to pay severance or take massive charges against earnings. And in the end, neither side ends up doing anything useful. I just wonder if companies have finally woken up to that fact and aren't just buying whatever the IT services sales guys tell them to anymore. I have seriously never heard of or experienced any good results of an IT outsourcing...it always puts the two companies at odds with each other.
The only long term future I see for these kinds of companies is with government agencies. Agencies in most countries basically aren't allowed to spend agency money on in-house resources. It's always assumed that services companies provide more value for taxpayers' funds, but we know that's not the case. I think that now that companies can offload lots of their day to day IT to cloud providers like Amazon or Microsoft, there will be fewer places for the CSCs of the world to ply their "best practices" trade. It'll be the totally lazy companies that want nothing to do with IT, or agencies that have no choice but to outsource.
I'm amused that HP is unwinding basically all of the mergers that they did to get so big. So many executive decisions like this are basically made by some 26 year old MBA from McKinsey or Booz Allen Hamilton, rather than the executives themselves. Granted, someone may have seen the writing on the wall for CSC/EDS/IBM/Accenture and others, but I doubt that. Like I said originally, it's probably financial engineering to squeeze out as much money as they can from HP before destroying it completely. IBM of late is famous for this.
So many companies go through the same sequence of events:
1) Build a successful business selling hardware
2) Customers ask for help with infrastructure and applications
3) Build a successful consulting business supporting hardware sales
4) Brilliant MBA notices consulting has a much higher profit margin than hardware
5) Company outsources hardware business and focuses on consulting
6) Pipeline of customers needing consulting dries up because they no longer buy hardware from company
7) CEO panics, has massive layoffs
8) New CEO looks around and sees that company no longer has a product to sell