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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.
Not so sure HP has been a "great company" for some time.
I wonder what sort of debts they will try and push onto whatever this remainder-of-HPE company is going to be. Gotta find a way to get that "clean slate" by scuttling the old ship with undesirably consequences of past leadership's transgressions, not to mention least favorite people. Those brave souls who remain will steer the old wreckage to the bottom of Bankruptcy Bay. A few will plan golden life rafts to escape the undertow that pulls hapless stockholders down with it.
It's restructuring. It's what company managers do when they notice that their revenues plummet and they somehow try to hold on to their comfy chairs, which they could not if it seems like they do nothing to deal with the plummeting revenue.
Once they notice that they can't do anything sensible (usually after spending a million or two on consulting, which usually makes me wonder what the fuck these goofballs are doing if they need someone telling them what to do any time a serious decision that goes beyond choosing the correct iron on the golf course is due), they need to do SOMETHING to appease shareholders.
Restructuring is perfect for this. One, it looks like you're doing something, two, it makes you look like you know what you're doing and three, it may cost whatever it costs because, hey, restructuring takes time and costs money, everyone knows that. But afterwards it's going to be SO much better that the new revenue boost will easily recover this in a year. Two, tops.
And two years later, you have a new CEO.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
On a lighter note, a topical joke:
A new CEO is examining his new office. In a drawer, he finds a note and three sealed envelopes. The note says "Hello, dear successor. You find here three numbered envelopes. Every time your numbers look bad and the board wants your head, open them, in order, and do what you find inside."
Well, not even a month after he took the helm, he creates his first huge blunder. Desperately he opens the first envelope and reads
"Blame your predecessor"
He does at the meeting and the board is appeased. Everything keeps going ok for a while until his numbers start to plummet and the board wants answers. He opens the second envelope and reads
"Restructure"
He does, everyone's busy restructuring and nobody can identify who is to blame for the increased costs. But after a while, restructuring is pretty much done but the increase in revenue is not coming in. Desperately he opens the third envelope and reads
"Prepare three envelopes"
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
I used to work for a fortune 500 company who farmed out all server operations to CSC... I was on a core applications support team and would often need to work with CSC to spin up new servers or do restores or refreshes. I would say that 1 in 3 times the results of a request were actually what was expected. Most of the time something would go wrong and we would have to go into damage control mode.
There was one time where we requested some new servers be brought up.... which they did... by reformatting production servers... I was always amazed at the novel ways in which CSC would screw things up.
I got the impression that CSC probably had some competent people, they would have to in order to architect and maintain that level of server infrastructure, but we (the customer) never got to talk to those people. We dealt with the drones.... who were less than impressive.
My eyes reflect the stars and a smile lights up my face.
Won't the new company have a near monopoly on incompentent consultancy?
Not at all. There is IBM, Andersen, McKinsey, etc. Incompetent consulting is a big and competitive business.
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