Dell will continue to work with EDS, but now that the latter is an HP subsidiary, Dell's looking beyond its traditional services to the cloud.
When the news came that Hewlett-Packard would acquire Electronic
Data Systems for more than $13 billion earlier this month, all eyes
turned toward the looming services battle between HP and market leader IBM.
Then there's Dell.
For a number of years, Dell had been one of the main suppliers of
PCs and other hardware through EDS in deals that usually involved large
federal contracts, such as a 2000 agreement to supply servers,
workstations and PCs to the Navy and Marine Corps for a total of $1.4
Now Dell and its customers are faced with new choices and possibilities in the wake of the EDS merger.
The HP and EDS deal comes at a time when Dell is looking to build out its services division
as the company looks to move away from its image as a low-cost box
maker into a more full-service IT provider. During its most recent
annual earnings report, the company reported its services revenue hit
$5.2 billion, a 4 percent increase from the previous year.
Steve Schuckenbrock, Dell's senior vice president for Global
Services, believes that the company's services model is moving away
from the traditional offerings that companies such as EDS supplied,
toward a model that focuses more on creating ways to deliver software
and services through a SAAS (software as a service) or cloud computing model.
"The other model [that Dell is looking at] is the more cloud-based,
on-demand-oriented services and the ability for customers to take
advantage of some pretty significant trends in the services space
around remote infrastructure management and cloud-based services, and
that's clearly what we are doing," said Schuckenbrock, who was
previously an executive vice president of services at EDS.
Despite its recent interest in services,
Dell is far behind both HP-$17 billion-and IBM-$54 billion-in a market
that Gartner estimated as worth $740 billion in revenue in 2007.
In EDS, Dell Could Lose a Product Pipeline
With those types of numbers, Dell's relationship with EDS still
matters a great deal to the company and its core business of selling
PCs and servers.
In his view, Schuckenbrock believes that EDS customers will
ultimately decide what type of hardware they want for their businesses
even with new HP ownership.
Lindy Hanson, an analyst with Technology Business Research, believes
that Dell's relationship with EDS had not been as strong as in the
past. In the last few years, EDS had turned to other hardware vendors,
including HP, to provide a different source of desktops and notebooks