back to article HPE spins out enterprise services business into CSC

HP Enterprise (HPE) has spun out its enterprise services business into CSC, creating an entity with US26bn of revenue. HPE has made lots of noise about turning around its services division, largely by aggressively reducing its headcount. In this move, HPE will be senior partner in the new entity by revenue and headcount but …

  1. Anonymous Coward
    Anonymous Coward

    An HPE Insider's View

    Given that the only, truly profitable contracts that HPE has are government contracts, this merger does make sense for both sets of shareholders. It obviously sucks for the employees and customers.

    Good employees will leave on their own, because they're valuable. Many customers have been leaving HPE, due to their various DC consolidation programs. Those employees who stay will be in their own Hunger Games to keep their jobs. Those customers who stay will receive even worse service.

    Safe to say that this isn't a good deal for anyone that matters.

    1. TheVogon Silver badge
      Holmes

      Re: An HPE Insider's View

      Adding more turd to a turd still leaves you with a turd....

    2. Anonymous Coward
      Anonymous Coward

      Re: An HPE Insider's View

      interesting as CSC got rid of its US government business and associated credentials, and left the international public sector in some limbo...

  2. Michael Duke

    Having worked for both, albeit 15 years ago, they deserve each other.

  3. Anonymous Coward
    Anonymous Coward

    Obvious from the start

    We all knew a sale of HPE was coming from the first moment the split from HP Inc was announced.

    I for one won't miss HPE or HP and look forward to Whitman pissing off to spend the outrageous $91m payout that she'll get from this.

    The rest of us meanwhile will wait for further job threats as these vultures seek "synergies".

    1. Anonymous Coward
      Anonymous Coward

      Re: Obvious from the start

      It was the same with CSC.

      As soon as the split happened, there was a massive shift in how CSC were trying to present themselves, it was obvious to everyone they were just tarting themselves up for sale.

      The phrase "lipstick on a pig" springs to mind!

    2. Anonymous Coward
      Anonymous Coward

      Re: Obvious from the start

      It's not a sale of the whole of HPE, just the Enterprise Services bit. The rest of HPE; Enterprise Group, Software and Financial Services, will continue as HPE.

      But you're right, the "what" wasn't a surprise, the "who" and the "when" were.

      Cue more massive redundancies, sorry "synergies". Time to get out...

      1. Anonymous Coward
        Anonymous Coward

        Re: Obvious from the start

        It's not a sale of the whole of HPE, just the Enterprise Services bit. The rest of HPE; Enterprise Group, Software and Financial Services, will continue as HPE.

        OK. Can you explain the difference between "Enterprise Services" and "Enterprise Group"? Having read the article, and visited HPE's (dreadful) website I'm, none the wiser.

        Cue more massive redundancies, sorry "synergies".

        $1.5bn of "synergies". That's about 18,000 jobs if they're US or European employees.

        1. Anonymous Coward
          Anonymous Coward

          Re: Obvious from the start

          Certainly - it can be confusing, especially as Enterprise Group can provide services.

          both "Enterprise Services" and "Enterprise Group" are organisations within HPE, along with Software and Financial Services.

          Enterprise Services is what was EDS and does IT Outsourcing and Apps and Business Services, Enterprise Group provides Servers, Storage, Networking and Technology Services (Break/fix and consulting).

          1. Anonymous Coward
            Anonymous Coward

            Re: Obvious from the start

            Certainly - it can be confusing, especially as Enterprise Group can provide services.

            Cheers, mate.

            So, in a typical HP deal they'd have signed up a company like mine for hardware, infrastructure and ITO, and now all three of those elements are from separate companies (plus the telco partner involved in most corporate deals). Smooth.

            Be interesting to see what happens as these bundled contracts come up for renewal....

  4. Cloud, what..... Sorry... Um... - you just made that up.

    synergies

    How do you get synergies from splitting up an organisation. Surely they now need two HR / Finance / IT / Marketing (insert overhead here) departments.

    We had 7 years of consolidation and now 7 years of unraveling the mess. Its a transformation if Biblical proportions.

    1. boltar Silver badge

      Re: synergies

      "How do you get synergies "

      You don't. Back in the day corporate directors and CEOs used to do what was good for the company and its employees. Now despite how the current crop of sociopaths in charge spin it with their moronic buzzwords, they just do whats good for their own bank balances and the hedge fund vultures who own most of the shares. To hell with the company, its workers and its history.

    2. Anonymous Coward
      Anonymous Coward

      Re: synergies

      I guess it is not a split in the true 'new standalone company' sense as HPE Enterprise Services or more accurately "Everett SpinCo, Inc., a wholly-owned subsidiary of Hewlett Packard Enterprise created for the transaction (“Spinco”)", is being subsumed into the non-government split off arm of CSC, aka CSC Inc.

      But no doubt there will be 'efficiency gains' / 'synergies' / 'right sizing' / 'right shoring' / 'pyramid re-alignment' i.e. REDUNDANCIES. But on the plus side there will be lots of share options bouncing around and revolving doors for the senior executioners, umm I mean, executives.

    3. Anonymous Coward
      Anonymous Coward

      Re: synergies

      Because while it's HPE splitting up, it's also a merger - ES and CSC both currently have separate HR / Finance / IT / Marketing departments. These (and everything else) will merge and, after major bloodletting, single, smaller departments will emerge - and there's your "Synergies".

      1. Preston Munchensonton

        Re: synergies

        These (and everything else) will merge and, after major bloodletting, single, smaller departments will emerge - and there's your "Synergies".

        Exactly. The typical redundant bits in a merger happen to be the one thing that ES (likely) won't take with it to CSC's welcoming bosom (or elsewhere, depending on your POV), but the cost savings will be for those other groups that surely will be present: engineering, operations, PMO, process control, etc. All the ITIL functions will have a lot of overlap, many of whom will exit on their own (which is the first real round of cuts) but also many of whom New Co will want to keep since the customer base is growing overall through the merger, though we'll see how long that lasts.

        There are always synergies in a merger or acquisition, even if those in charge foul things up like Carly did so many years ago.

  5. not.known@this.address Bronze badge

    "It says 'CSC' on the letterhead..."

    ...so CSC will carry the can when it all goes pear-shaped.

    I'm still trying to understand how business analysts, financial market "experts" etcetera all believe that a company splitting part of itself off is doing something good - the only reason a company will deliberately remove chunks of itself is when those chunks are weighing the rest of the company down (in their eyes, at least).

    Doesn't matter how they try to dress it up, senior management will never get rid of anything they think can earn them more money. And the better they try to make it sound, the worse it will be for any employees and customers of the parts that get lopped off the main company.

    If it was really going to be successful, the Management would be fighting tooth and nail to keep it in-house and not letting anyone else get anywhere near it.

    If someone offers you a pig in a poke, beware.

    But if someone offers you a prize porker in a Louis Vitton clutch, run like hell...

    1. Preston Munchensonton

      Re: "It says 'CSC' on the letterhead..."

      I'm still trying to understand how business analysts, financial market "experts" etcetera all believe that a company splitting part of itself off is doing something good - the only reason a company will deliberately remove chunks of itself is when those chunks are weighing the rest of the company down (in their eyes, at least).

      The theory is not too far removed from the old Unix mantra of doing one thing really well. It's not hard to see some companies really cannot handle being in too many markets (Microsoft, HP) and these companies definitely can do good by splitting off so-called "non-core" parts of the business. Whether they actually do or not is dependent on a lot more than just making the sale happen.

      In the case of CSC-ES, the one thing that really should happen probably won't, which is jettison so many of the bonehead PHB that only have a handful of direct reports (or less). My own PHB from my tenure at EDS actually had this very thing happen after the HP merger, but he was competent enough to revert to an individual contributor. That's rare and it's those parasites who couldn't make it outside management that need to be jettisoned.

      1. Anonymous Coward
        Anonymous Coward

        Re: "It says 'CSC' on the letterhead..."

        I've worked on contracts for both organisations. In truth there's not much to choose between them. Both have far too much managerial dead wood. My view of the mess that both CSC and HPES have got themselves into is that the sales teams have to take a lot of the blame. I've lost count of the number of times that one of the shiny-faced little dears has bounced up to see the techies full of themselves and the contract they just "won". Then the techies look at it the winning bid and say "We couldn't build it for that money, let alone make a profit on it." In-house staff tend to think it's just their employer that suffers from this, but working across the sector it's one of the biggest problems. Of course customers and the sales teams then benchmark against the winning bid and tend to assume that big IT can be done on the cheap.

    2. Anonymous Coward
      Anonymous Coward

      Re: a company splitting part of itself off is doing something good

      "business analysts, financial market "experts" etcetera all believe that a company splitting part of itself off is doing something good"

      Goldman Sachs are the financial advisors to HPE on this deal [0]. They don't have to believe anything except they'll make money somehow. Goldman Sachs (the outfit that called its customers "muppets" [1]) is the company that a decade and a half ago told the EU that Greece was financially stable enough to join the Euro [2]. The consequences are still rattling around even this week - another 10bn euro loan tranche, in what looks very much like what the TV adverts from Wonga etc used to never quite call a "debt consolidation" exercise, which just kicks the ball further down the road.

      In a more general picture, the M&A (mergers and acquisitions) specialists in the big beancounting companies have come to the end of the M&A road, they've merged pretty much every big outfit they can, and in recent years they've had to go into reverse and start de-merging things just to keep the M&A business revenue stream flowing. In line with the company's policy of continuous product and service improvement, as always. And worsening employment conditions at the sharp end. As always. The Board will be OK though.

      Does this kind of thing happen on the same scale in (say) Germany, a country with a relatively stable relatively succesful (before the Greek loans) economy?

      [0] http://www.reuters.com/article/us-hewlett-packard-divestiture-csc-idUSKCN0YF2PV

      [1] http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html?_r=0 (other financial advisers are available)

      [2] http://www.bbc.co.uk/blogs/radio4/entries/fba91847-2c24-394f-a088-99fbb6973b51 (an episode of Radio 4's usually-excellent More or Less series)

  6. ShortLegs

    Who thought this was for the employees and clients? It was for the shareholders.

    HP walk away with $4.5billion in cash, they also saddle the new company with $2.5billion of debt, transferred from HPE... HP shareholders are the only winners, although those who have "SpinCo" shares might not be too impressed.

    Rather reminiscent of HP selling off it's highly lucrative printer division, which effectively diluted shareholder value by 25%.

  7. This post has been deleted by its author

  8. jeffty

    It doesn't surprise me that HPE are spinning off ES, they've been completely void of ideas as to how to turn it round, short of laying staff off by the thousands.

    A lot of the ex-EDSers I worked with at HPE/HPES in ITO saw parallels in the way EDS was run prior to the HP buyout and how it has been run over the last couple of years.

    Bans on overtime, travel and home working, screws tightened on investment and internal spend (training, staff education etc). Huge cuts into staff numbers. All of these short-term measures enacted to give the impression to a potential buyer that the company was lean, mean and profitable.

    The truth is that EDS were holed below the waterline by these same measures pre-acquisition, and HP found out they'd been sold a pup. Odd to see history repeating itself.

    If CSC think they can make "synergies" they're in for a rude shock.

    1. Anonymous Coward
      Anonymous Coward

      The truth is that EDS were holed below the waterline by these same measures pre-acquisition, and HP found out they'd been sold a pup. Odd to see history repeating itself.

      And now they've sold the pup to CSC, who misguidedly think that if they lay off another few tens of thousands of workers it'll all come good.

      Now, Carly, what's the strategy for sorting out that Autonomy acquisition........

      1. Anonymous Coward
        Anonymous Coward

        Carly was long gone by the time of the Autonomy debacle; that was on Apotheker's watch...

    2. Anonymous Coward
      Anonymous Coward

      "Bans on overtime, travel and home working, screws tightened on investment and internal spend (training, staff education etc). Huge cuts into staff numbers. All of these short-term measures enacted to give the impression to a potential buyer that the company was lean, mean and profitable."

      Well that's why its a perfect match. This statement could equally be about CSC.

      Welcome HPE'ers to your new CSC overlords.

      You'll enjoy the synergies alright...but you have my sympathies.

      1. Amersfoort

        Oh we at HPE (or as we preferred to call it - EDS) knew we were just being lubed up for a right royal reaming, we just did not know who by. Now we do and its by the rough kid from the shallow end of the gene pool !

  9. Anonymous Coward
    Anonymous Coward

    Oh jeeeeeeezus

    http://www.benzinga.com/analyst-ratings/analyst-color/16/05/8028526/trip-chowdhry-on-hp-services-computer-sciences-merger-tw

    Noting that the IT Services industry is in "zero-sum" game, Chowdhry highlighted that "combined CSC + HPE Service to layoff more than 65,000 employees of the 176,000 total employees."

    HOLD ONTO YOUR HATS BOYS AND GIRLS!

  10. Anonymous Coward
    Anonymous Coward

    Once again...

    ... Bill and Dave will be spinning in their graves. Here's hoping they'll haunt the execs and board.

    1. Mpeler
      Mushroom

      Re: Once again...

      Yep, thanks to the idiot board, Bill and Dave are spinning in their graves again. They've "managed" to create a perpetual motion machine.

      Many, many moons ago, when HP was still HP, and flagellant was still a gleam in Dick Hackborn's eye, it was said that they were waiting for Bill Hewlett to pass away so they could split the company.

      Out of the one HP in the late 80s, it's become something like 20 company fragments. They all fit together well when they were in the REAL HP, greater than the sum of its parts, but now stick out like pimples and pointers, painful reminders that things were once better.

      Almost wonder who or what had it in for Bill and Dave.....

    2. Anonymous Coward
      Anonymous Coward

      Re: Once again...

      The one good thing about this that I can think of as an ex EDSer is that we won't have to listen to the sentimental, sanctimonious and disingenuous "Bill & Dave garage" references anymore.

      "What will happen to the garage?" was a genuine published FAQ during the split from HP inc. Really Meg? Do you seriously think that was the question I most wanted to know the answer to? I think we both know the answer but only one of us will be $91m better off this time next year.

  11. Anonymous Coward
    Anonymous Coward

    Pension

    It makes me wonder which company will now be responsible for sponsoring the EDS Retirement Plan and worried whether my pension will be safe.

    1. J J Carter Silver badge

      Re: Pension

      Sorry, your pension is gone

    2. Anonymous Coward
      Anonymous Coward

      Re: Pension

      That and whether the redundancy payoff will worse should be the only genuine concern for any sane employee of eithe HPES or CSC

      I gave up giving a #$@* what the Company was called long ago. It makes no difference.

  12. J J Carter Silver badge
    Trollface

    Naturally...

    If you follow the money, everything leads back to a brass plaque in Panama office.

  13. Mr Wrong

    what next?

    Does anyone else also think that after that HPE will become perfect acquisition target for Larry E? And he finally will have its own IBM

    1. This post has been deleted by its author

  14. Anonymous Coward
    Anonymous Coward

    Two merger payoffs for Meg then

    She's bloody good at this, you have to give her that

    1. Anonymous Coward
      Anonymous Coward

      "She's bloody good at this"

      If by "this" you mean firing loads of people and driving HP into the ground then yes, sure. The share price has dropped by a third in the last 18 months.

  15. Anonymous Coward
    Anonymous Coward

    Another Huge Payday for Executives

    Another huge payday for executives on share price linked pay and bonuses, paid for by shipping EMEA/UK jobs to India to improve margins and wrecking the ability of this SERVICE company to actually SERVICE it's clients properly. HPE is the landscape of failure and it's board are the amateur gardeners. Out of 12 board members, including the CEO/executive chairman, only one has experience in a business that is core to HPE and they are doing nothing to solve the problem, in fact they appear to be part of it ! To make a service company work your board has to be passionate experts in IT Outsourcing and history has shown that the HP board just does not have it, so it will ultimately fail. Without critical IT service skills at the board level all the jelly-mold MBA wallies will not help, opportunities will continue to be missed and critical problems, like HPE's inability to deliver solutions, will remain. I fail to see how a merger with CSC, a company fined for account "irregularities" and investigated for "inappropriate payments" is yet another dodgy bet. They, like HPE, seem unable to succeed in their core business and resorting to the same consultancy led so-called solutions will not help them either. For HPE trying to buy your way out of trouble when the real issue is a bad board is not a substitute for ignorance about the industry you claim to be leaders in ! I would have thought that HP's long history of bad and botched purchases like Palm, BE O/S, Autonomy, VoodooPC, EDS and Fortify should surely have shown them that they are just plain bad shoppers !

    Sadly I think for the repeatedly savaged and demoralized hard working shop floor staff at both HPE and CSC this does not bode well. Whitman is going to address HPE staff tomorrow in another corporate cobblers message - get out while you can folks, before redundancy terms are changed to statutory minimums.

    1. Anonymous Coward
      Anonymous Coward

      Re: Another Huge Payday for Executives

      I wish I could, I've asked for VR 3 times, each time to be rejected whilst watching my colleagues, doing the same job as me, get CR'd. I then got put into a CR pool (1 of 1 so was told I was 100% going so there was no VR option) then the day before I was to sign the final paperwork I was told it had been pulled and I now had to stay. I have since applied for VR once again for it to be rejected again.

      I'm not being allowed to leave whilst colleagues who don't want to are being forced out.

      1. Anonymous Coward
        Anonymous Coward

        Re: Another Huge Payday for Executives

        This is such an insult to the majority of people who work at both companies and care about their jobs.

        There are people who fear the Big R and people who can accept it or have a plan for if/when it ever happens.

        Then there are delightful people like you...... Who think they deserve it.

        1. Anonymous Coward
          Anonymous Coward

          Re: Another Huge Payday for Executives

          You have no idea my friend, no idea.........

        2. Amersfoort

          Re: Another Huge Payday for Executives

          Rubbish, its not an insult to the majority of people at both companies who care about their jobs (of which I am/was one), its an insult aimed squarely at the HP executives. I have been in work force reductions pools SIXTEEN times since HP took over EDS. I have been doing two people roles since 2014 and three people's roles since January at 12 hours a day and pretty much on call every weekend trying to sort out issues caused by know-nothing HPI resources, who while they have many letters after their names, have so little experience it is all they can do to work to a script ! I have seen a dozen staff with 20 years experience discarded in one day without one single manager bothering to turn up and shake them by the hand and say "Thank you". After raising this with them they cited HP travel restrictions as the reason, yet I travelled to the UK from my home on the continent at my expense to ensure I was there on their last day. Their argument might have had some little merit if they had even bothered to send a short thank you e-mail, but they had not ! With the end of the financial year (October) looming I reasoned that the current VR terms would be reduced as HP is following the same play book as happened at IBM.

          One more thing. Yesterday there was a mail from a senior UK exec announcing another 500 are to go and yet even now they cannot be honest with the hard working shop floor staff. In his mail he cited that HP would make every effort to relocate staff which was news to us. If you are targeted for CR you do have the option to apply for other roles in HP but they never move you and your role, that way they get out of paying any relocation costs. We have noticed that they make sure those new roles are at lower salaries and you can apply only after meeting 3 which gives you just 5 days to apply and interview before you are out.

          This CSC move will ensure a lot more than the most recent 500 to go at HP get, I doubt many in the HP ITO organisation will survive the next year !

          1. Anonymous Coward
            Anonymous Coward

            Re: Another Huge Payday for Executives

            Majority of ITO organization will surely survive - in global delivery centres. It was said clearly lately (first time I think) in one of those "town hall" calls: that only US public sector is allowed for onshore staff in longer term, other accounts are supposed to be 100% offshore and the sooner it happens, the better. UK by no means can be considered offshore, so in 1-2 years time there will be just zero technical positions in ITO there, at least not in 'run' part, maybe some 'build' will stay, like in France.

  16. michaeje

    Time to get out now!

    If you have a contract with a break clause, as this will be another 2 years of upheaval with unhappy and unmotivated supplier staff not delivering...

    and if you are staff and have suffered through the last few years (I did) - a change can be so refreshing...

    1. Anonymous Coward
      Anonymous Coward

      Re: Time to get out now!

      Easier said than done when they keep rejecting your VR request...

      1. Amersfoort

        Re: Time to get out now!

        Given that HPE uses a scoring system to pick out those for CR you can take precautions in the event of VR being rejected. Embark on a programme to make sure your figures take a dive. Always late booking time, do not update Workday info, delete goals and objectives, work exactly to the clock and refuse to take out of hours calls, basically kick back and do not be quiet about it !

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