Outsourcing Update: Xerox Buys Outsourcer ACS -

Posted on October 14, 2009 by Peter Vogel

On the heels of Dell’s purchase of Perot Systems, Xerox announced that it was purchasing Affiliated Computer Systems (ACS) for $6.4B. Dell just agreed to buy Perot Systems for $3.9B. Now that 3 major hardware companies have purchased outsourcing vendors the outsourcing/sale of hardware market will get more interesting. ACS claims it is the “world's largest diversified business process outsourcing (BPO) firm, ACS is a $6.5 billion company with revenue growth of 6 percent and new business signings of $1 billion in annual recurring revenue during its fiscal 2009.”

Other Developments with Perot Systems

Apparently not everyone at Perot Systems thinks the purchase by Dell is so wonderful as some Perot Systems’ shareholders filed suit to stop the sale. In the meantime Perot Systems announced that it will acquire BearingPoint China Consulting and made the following statement:

BearingPoint China Consulting has earned numerous industry awards. In 2008, the China Software Association and ERP world.net ranked the firm among the "Top 10 IT Consulting Firms" in China, and named CEO Machan among the "Top 10 People of the Year in the IT Industry" in China. The firm also was chosen as "Most Trusted Consulting Firm" in 2007 by the China Enterprise Confederation.

Of course this acquisition is subject to U.S. Bankruptcy Court approval as well as that of the Chinese government. It seems that Perot Systems is not sitting idle while the Dell acquisition is taking place.

Where are We Going? Proprietary Systems?

What’s going on in the outsourcing world with these major acquisitions? One answer might be that outsourcing vendors will now try to tie their customers to them more closely by creating special hardware/software systems that make leaving more difficult and expensive. Remember a year ago that Oracle and HP announced that specialized hardware systems for Oracle databases. Sounds a lot like the old minicomputer days when every hardware manufacturer had a proprietary operating system and as a result customers found it cost prohibitive to change vendors…hard to image in today’s world of Windows Servers and Linux. Time will tell.
 

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Dell and HP Now Outsourcing Competitors for Services and Hardware

Posted on September 23, 2009 by Peter Vogel
Reports that Dell is spending $3.9 billion to acquire Perot Systems are not much of surprise since HP’s one year report card on acquiring EDS (Electronic Data Systems) are getting high marks. When HP acquired EDS in August 2008 for $13.9 billion there was some question about whether HP could transform EDS into a profitable outsourcing business, and now HP reports great process. HP eliminated about 25,000 EDS employees and cut salaries by more than 20%, and now report “operating profit margin on services hit 13.8 percent, the highest in a decade.” As well HP has retained 199 out of 200 of EDS’ top accounts. Now the EDS name has been replaced with a new name – HP Enterprise Services.

Dell’s Gamble on Perot Systems

Given Perot Systems’ strength in electronic health records Dell’s purchase is very timely since the “government is pouring $19 billion over the next five years into technology to help doctors and hospitals digitize medical records.” Currently Perot Systems provides services to over 1,000 hospitals and is in the business of automating patient records. Ironically enough Dell’s stock price fell on the announcement of the acquisition of Perot Systems, just as HP’s stock fell at the announcement of its purchase of EDS last year.

More Hardware Sales

Obviously HP and Dell can sell more hardware to their outsourcing customers, and the other major competitor in this space is none other than IBM! All three major hardware companies. But the irony here is that in 1962 Ross Perot started EDS after a successful career with IBM and created a new industry which today is known as outsourcing (and had various labels over the years including Facilities Management). EDS even merged with General Motors. However the GM merger did not last long and at the end Ross Perot left to start his new company, Perot Systems. So this market space has kept the same players for some time. One can image that Dell and HP will sell a great more hardware. Stay tuned to this market space.

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