HP Enterprise Services + CSC ‘spin-merger’ sucks in iSoft and UXC

Outsourcing needs a helping hand.

 

Australian government agencies are facing a rapidly shrinking choice of domestic and international technology outsourcers after HP Enterprise Services announced a US$8.5 billion proposed merger with veteran player CSC, a deal that will see a new entity spun out separately from both companies.

Revealed to Australian customers on Wednesday morning, the two fading giants have told customers and shareholders they expect the merger deal to be completed by March 2017 to create what is being sold as a “strategic combination of the two complementary businesses” that is anticipated to have annual revenues of US$26 billion.

Under the proposed new structure both CSC and HP Enterprise Services will have equity “approximately 50 percent of shares” each, with CSC’s Mike Lawrie to become the chairman, president and chief executive of the new company, while HP Enterprise Services’ boss Meg Whitman will join the board.

The deal is still subject to regulatory and shareholder approval.

A major question that dozens of Australian customers are certain to be asking is what impact the transaction will have on healthcare software provider iSoft, which CSC acquired in an acrimonious on-market takeover for $460 million in 2011 that was doggedly fought by the then ASX-listed company’s head, Gary Cohen.

iSoft’s customers in Australia include multiple large health services in New South Wales, Victoria, Queensland, the Australian Capital Territory, South Australian and Western Australia.

Although the iSoft brand name is not specifically named in the announcement, Government News has been told by CSC that the health applications provider is definitely part of the merger and spin out as it has been fully integrated into CSC for more than four years.

Also in the merger mix are government and corporate customers of former Australian IT services company UXC, which CSC acquired for $428 million in October 2015, will also be contemplating the news that their provider will undergo its second change of owner in just over 6 months.

UXC’s stated public sector customer list includes the Australian Securities and Investments Commission, the federal Department of Industry, Innovation, Science, Research and Tertiary Education (DIIRSTE), Queensland Health, Transport for NSW, the Department of Defence and the Department of Human Services.

The latest mega-transaction in what has become a challenged market for IT services comes as big players, including HP Enterprise Services and CSC, have been hit hard by successive waves of margin sapping technology consolidation, a trend that has included the rise of lower cost cloud computing and a proliferation of mobile devices that have decimated once dominant desktop and server markets.

Formed following a the sale of Electronic Data Systems to Hewlett Packard in 2008 for US$13.9 billion, HP Enterprise Services never managed to regain the market share or customer footprint that was typified by big cluster or whole-of-government deals that often nudged the billion dollar mark and spanned periods as long as a decade.

The extent of shrinkage and low margins in the outsourcing market was sharply underscored when Lockheed Martin departed the Australian public sector IT outsourcing market last year after initially making strong inroads at key customers including the Australian taxation Office.

Meanwhile, Mr Lawrie and Ms Whitman (who was once CEO of eBay) are keenly selling the deal as a good thing for clients.

“Our proposed merger with HPE Enterprise Services is a logical next step in CSC’s transformation,” Mr Lawrie said in the announcements.”

“Clients are feeling the pressure to digitally transform their enterprises to meet new business demands and customer expectations. They need a partner with the innovation, scale, leadership and dependability to answer the challenge.

“As a pure play, the combined company will be built to lead digital transformations using next-generation technology solutions from both companies,” Mr Lawrie continued before unbolting any connection to the former server monolith.

“It will be able to operate independent of any single hardware provider, while partnering with the world’s leading technology providers, including HPE.”

Meg Whitman was equally optimistic.

“The ‘spin-merger’ of HPE Enterprise Services with CSC is the right next step for HPE and our customers,” Ms Whitman said.

“As two companies with global scale, strong balance sheets and a focus on innovation, both HPE and the new company will be well positioned as leaders in their respective markets.”

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Toole condemns wild Inner West Council meeting

NSW Local Government Minister Paul Toole has publicly condemned protestors and politicians after wild scenes at the first meeting of the new Inner West Council last night (Tuesday).

Hundreds gathered to protest against the forced merger of three metropolitan Sydney councils, Ashfield, Leichhardt and Marrickville – announced on May 12 – and to voice their opposition to unpopular motorway project WestConnex.

Inner West Council Administrator Richard Pearson was booed, spat on, and his iPad and papers knocked to the ground as protestors jostled in the council chamber. The meeting was called off shortly after.

Mr Pearson, an Inner West resident and former Deputy Director General of NSW Planning, has been accused of being a Liberal government puppet and of capitulating to WestConnex, both of which he hotly denies.

Mr Toole held a press conference about the council meeting this morning and said he was horrified by the behaviour of some of the protestors. He also criticised MPs at the meeting, which included Balmain Greens MP Jamie Parker, saying: “They could have calmed it down.”

“What we saw last night was a mob mentality of trying to disrupt the democratic process,” Mr Toole said. “I don’t think there’s any place for people to protest by actions of spitting and physical intimidation. Staff should not have been subjected to it.”

But the Minister would not answer whether the state government’s relentless pursuit of forced council mergers was to blame for the tinderbox situation or if police would press assault charges against the two protestors.

Mr Toole said it was the community that suffered from the meeting being abandoned because service delivery and establishing the new council’s implementation advisory group and local representation committee had all been on the agenda.

Meanwhile, the three former council mayors, Lucille McKenna, Sam Iskander and Darcy Byrne, pleaded for calm and said they did not want future meetings to be unworkable or to “become a forum for abuse.”

“We greatly appreciate the strong display of public support for our reinstatement at last night’s meeting and also condemn the irresponsible actions of those individuals who appear to have assaulted the council’s Administrator,” said the mayors. “In particular, we call on all citizens to make sure that the Administrator of the council and the council’s officers are treated with respect.

“Our argument is with Mike Baird and the Liberal government for the authoritarian and undemocratic way that they have dismissed elected representatives.

It is understandable that their approach has angered many people in the Inner West but there is never any excuse for threatening and insulting behaviour.”

There is now a question mark over how next month’s council meeting will pan out. Mr Toole said he would take whatever action was need in order for the meeting to proceed unhindered.

The mayor’s said:  “We have made clear to the council Administrator our willingness to participate constructively in a committee system to protect residents from having essential services disrupted and to ensure infrastructure projects proceed.”

However, they said they would push for the resumption of elected local representation, which has effectively been suspended until the local government elections in September 2017.

NSW Governor David Hurley proclaimed 19 new NSW councils earlier this month. There are 12 merger proposals pending, most due to legal challenges, and 14 have been dropped.

 

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Riot police called to first meeting of Inner West Council

The first meeting of Sydney’s new Inner West Council was abandoned last night (Tuesday) after a protestor spat on Administrator Richard Pearson and another knocked his papers to the ground.

Several hundred residents turned up to the meeting at Petersham Service Centre, livid over the forced merger of Ashfield, Leichhardt and Marrickville Councils and the mass sacking of mayors and councillors earlier this month.

Dulwich Hill resident Kate Wake said there was a police presence but organisers had clearly underestimated the number of attendees and the strength of the anger provoked by forced council mergers and the approval of WestConnex.

“It was pretty powerful, and confusing. They weren’t expecting such a crowd, I think,” said Ms Wake.

She said the rest of the crowd did not support the behaviour of the two protestors towards Mr Pearson and that former councillors and mayors were frustrated that they did not get the chance to discuss important local issues.

“That was assault, both of them,” Ms Wake said. “Richard Pearson couldn’t speak. Nothing could be done. You couldn’t conduct any business. There was nothing to fight against.”

Draft budgets, service provision and the composition of local representation committees were all on the meeting agenda but Mr Pearson did not even get to finish the Welcome to Country.

She said it did not help that the new Inner West Council logo resembled a “big blue Liberal-style” logo or that people had felt the meeting was deliberately kept secret.

“Talk about rubbing our noses in it,” Ms Wake.

NSW Local Government Minister Paul Toole reacted strongly to events at last night’s meeting this morning.

Mr Toole said he was disgusted by the intimidation and spitting that Mr Pearson had to contend with, calling it “a mob mentality.”

He would not say whether police would press charges against the two protestors. He insisted that meetings of new councils were going well in other areas and insisted that the date of the September 2017 local government elections for newly merged council would not change.

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Murray edges Stepanek in French Open thriller

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Real suffer Ronaldo scare ahead of final

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