HP's Big EDS Plans Include Big Cuts

• By Jim Barthold
• 09/22/08

HP has completed the acquisition of EDS, an outsourcing innovator; now it's restructuring, with plans to cut jobs, the companies announced last week. In order to effectively play in the enterprise IT space, HP aims to cut about 7.5 percent of its workforce. A combined 24,600 employees, half in the United States, will feel the affects.

HP spent $22 billion to get its hands on EDS to expand its enterprise presence. The company now has "the broadest technology capabilities in the market to meet customer needs today and in the future," said Mark Hurd, HP's chairman-CEO.

Hurd's job is safe, but others won't be so lucky. HP said it would replace the positions over the next three years to create "a global workforce that has the right blend of service delivery capabilities to address the diversity of its markets and customers worldwide."

The goal of the streamlining is to address what HP, in a news release, called "enterprises…facing an explosion of digital content, aging infrastructure and constrained resources" in an environment where CIOs "must rethink their technology environments and choose to manage it themselves, outsource it or receive services through the cloud."

The decision to cut people in a slow economy drew mixed, albeit mostly positive reviews from John Madden, principal analyst at Ovum.

Madden posited that "letting go of people in a slowing economy is never enjoyable for any company [but] what's encouraging is that HP committed to reinvesting integration savings into its workforce…to ensure it has the global footprint it needs, sending an important message to customers concerned about how the reduction will affect their HP/EDS contracts."