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Hewlett-Packard and Compaq Computer have long coveted the e-business consulting and systems integration business that has powered IBM through the current economic slump.
But the reality, analysts said, is that HP and Compaq have very different consulting operations than IBM or the likes of Accenture, Cap Gemini Ernst & Young or Electronic Data Systems. And experts said the merger will not come even close to putting them on equal ground.
“Were not comparing apples to apples here, because theyre not even in the same fruit basket,” said Tom Rodenhauser, principal of Consulting Information Services. “And combining two wannabes isnt going to give you a star.”
But analysts believe HP-Compaq does have the potential to build or acquire a consulting organization that could rival IBM.
HP attempted to acquire PricewaterhouseCoopers late last year, but had to scrap the deal when the computer makers stock began to slide. However, the door was left open for further negotiations, and a deal may yet be done, said Eric Rocco, vice president of Gartner Dataquest.
When HP and Compaq announced their merger last week, they said they will now have the “scope and scale, and the ability to challenge IBM,” and other big consultants to win a larger piece of the global IT services market.
Certainly on paper, the merged company appears to have the power to take on the other consulting giants: According to Gartner, the combined entity will have about 65,000 consultants, and about $13 billion in services revenue.
The merger would also make HP-Compaq the third or fourth largest services organization by revenue in the world, behind IBM ($33.1 billion) and EDS ($19.2 billion), and about tied with Fujitsu.
The main difference is that most of HPs and Compaqs consultants are involved in the installation, maintenance and servicing of their own hardware and software, Rocco said. IBM and EDS, on the other hand, excel in the higher-profile field of providing consulting on big systems integration, electronic commerce, Enterprise Resource Planning or supply chain projects. “You cant get there from here by just combining the two,” Rocco said.
HP and Compaq plan to move more toward consulting services because thats where faster growth – 15 percent per year – is occurring, though the support services they provide now actually provide higher margins, Rocco said.
“HP and Compaq will have to lead with their strength, which is hardware,” said Legg Mason analyst Bill Loomis.
HP CEO Carly Fiorina said the sheer size of the combined company will allow it to forge stronger commitments from the other consultants. “One of our excitements about this combination is that we can build together even stronger partnerships,” she said.