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Xerox Copy of Dell

September 28, 2009
by vciotti
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Sorry, couldn't resist that pun! Some background:

2008: HP buys EDS, Ross Perot's original IT firm for $13.9B, making them 2nd to IBM in total revenue. Why? Hardware is becoming a commodity, hard to make double-digit profits for stockholders, so HP joins IBM in stressing "service" over hardware sales. You

can easily make double-digit profits in "service" (read, "consulting"), by charging over a hundred dollars an hour for employes you pay less than $50 an hour.

Last Week: Dell buys Perot for $3.9B, per my previous post. Why? (cut and paste the last 2 sentences above). Perot had just bought JJ WIld to buy into the HIT niche, and promised clients the stability and security only a large firm can bring to the table. Just imagine how secure and stable they will be now!

This Week: Xerox is buying ACS for $6.4B, Why? (cut and paste same 2 sentences from above). This only a week after ACS announced a mandatory "furlough" (week off

without pay) for all employees, due to slumping profit margin: only $98M on $1.6B in their 4th quarter, about a 6% profit margin. ACS gained fame in HIT circles when they bought Superior Consulting a few years back, promising clients the stability and security only a large firm can bring...

So the trend is clear:

1. (cut and paste same 2 sentences from above)

2. All 3 firms will start advertising how they are the only safe, stable, large, secure firms to buy for your IT consulting needs, with "X" decades of experience (that they just recently bought).

3. All 3 firms will struggle with trying to manage talented professionals, instead of hardware widgets. Or maybe they are right: their type of IT consulting

is just another commodity: hire cheap, and sell dear?

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