Sun and HP ramp-up services businesses

Customers are always going to need service & support and with margins tumbling on hardware, Sun Microsystems and HP are making a dash for the relatively recession proof services business.

  • E-Mail
By  Greg Wilson Published  August 26, 2001

Ramp-up|~||~||~|Customers are always going to need service & support and with margins tumbling on hardware, Sun Microsystems and HP are making a dash for the relatively recession proof services business.

According recent IDC research, the US economic slowdown is having a minimal impact on the services business. The worldwide market grew a solid 11% in 2000 to reach $395 billion. Through 2005, another $305 billion will be added to its bottom line, bringing it to $700 billion. This increase computes to a 12% compound annual growth rate (CAGR) from 2000 to 2005. In 2001, because of the slowing US economy, annual growth will be a slightly lower 11%.

With the services market looking buoyant, recent weeks have seen Sun Microsystems strike an alliance with EDS in a bid to add the business consulting element to its professional services portfolio. HP for its part, has embarked on the acquisition trail once again with a $610 million bid for Comdisco’s computer services division.

The services business “is definitely moving this year,” says Peter Redshaw, senior analyst, Gartner Group.

“They [HP & Sun] both want a better and more respected services business, they want something more vendor neutral and they want some thing that can operate somewhat independently of hardware and software product cycles, which have been hit recently. A services business gives [them] a cushion to the downturns in the various markets,” explains Radshaw.

According to the Gartner analyst, the Sun/EDS tie up is critical if the vendor is to upgrade its professional services business. Previously, Sun’s services had been limited to little more than the technical support of its own proprietary platform, says Redshaw. However, EDS brings with it business consulting expertise, making the Unix vendor a more credible candidate for the big service projects. “[Sun was] limited to servicing its own products… and they couldn’t take on a project that had a big consulting element, or a big deployment element or a big integration element,” comments Redshaw. “While services had a booming part of the business [Sun] would sooner or later hit a wall where they couldn’t expand at the same rate due to this limitation.”

Whether the EDS deal helps Sun to get a look in on these larger integration projects remains to be seen. “Time will tell how closely these companies work together,” adds Redshaw.

Sun’s channel marketing manager for Middle East & Africa, Manual Makki, believes the EDS partnership will significantly change the competitive landscape of the services industry. Currently, the deal is being ‘replicated’ through Sun’s organisation and the region will soon see the benefit of the deal. “We’re seeing organisations in the region, without the history of legacy machines, moving towards the Internet. They have a real need for these e-sourcing services,” says Makki.

Although the EDS tie up adds greater weight to Sun’s services side, the vendor has a long way to go before it can be seriously compared to the likes of IBM Global Services. However, says Makki, Sun doesn’t want to be perceived as the kingpin of services. Sun’s strategy will be to focus on the platform, architecture and middleware layer, while the other service elements will be delivered by technical and business partners.

“With professional services we’re providing the first layer technologies [at] the infrastructure,[level]” comments Makki. “The business expertise or the application expertise will remain the field of our partners. No one organisation can do it all,” he adds.

On the other hand, Hewlett-Packard’s multimillion-dollar drive to reinforce its services business has still to be given the green light by the US courts. Assuming the deal is successfully concluded HP will snap up a 1,300-strong army of support engineers to swell its own services organisation. According to a Garner Dataquest report on the proposed acquisition, the addition of Comdisco’s technology services would “round out HP’s global business continuity capabilities…

Although the availability services market segment is extremely fragmented, the acquisition catapults HP into a top revenue tier of global availability service providers.

According to Redshaw, the deal is a step in the right direction for HP. “But HP has a long way to catch up… HP claims it has a different strategy than IBM, but to build a competing business with IBM is going to take time… and it won’t happen this year,” predicts Redshaw.

At the time of going to press, HP’s local operation was still waiting to find out the exact local impact of the deal. However, in an interview two months ago, HP’s Mehmet Oguz said that the vendor intended to grow it’s service business by 200-to-300% in the next 12 months alone.

With such high predictions of regional growth, it’s likely that the local office is going to find a need for Comdisco’s expertise.
||**||

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code