Within two months of each other, both Hewlett Packard Enterprise and Dell have made major moves away from the enterprise IT services market. Here's why.While the overall IT outsourcing market remains strong — thanks to managed and cloud services — the typical enterprise IT outsourcing deal size is shrinking. Very quickly. A case in point: BAE Systems recently outsourced IT operations to CSC for $600 million — less than one-third the size of a similar deal the duo struck in 2005, The Wall Street Journal notes. Moreover, the average size of the top 100 outsourcing deals for 2015 was $392 million — down from $680 million in 2005, according to IDC, the Journal adds.At the time, both companies were chasing IBM Global Services. But a painful reality gradually emerged: Both deals arrived just as the IT spending pendulum was starting to swing away from long-term ERP and CRM deployments, and toward cloud services.The HP-EDS and Dell-Perot business combinations never quite lived up to their hype, and even IBM's services business -- its crown jewel in the 1990s and early 2000s -- has lost its luster. Meanwhile, big IT consulting firms and global systems integrators have been responding aggressively to the cloud services wave. Accenture, for instance, is actually coming down market -- introducing SMB cloud services. And CSC has a large portfolio of managed, cloud and infrastructure services.
Dell, HP Enterprise Rethink IT Outsourcing Strategies
Amid those market realities, Dell is selling its enterprise IT services business (the former Perot Systems) to NTT Data for $3.055 billion. Cash from that deal will help to balance Dell's balance sheet as the company seeks to finalize is $67 billion EMC buyout. HP Enterprise shocked the industry with its own deal today, announcing plans to spin off and merge its enterprise IT services business with CSC. That's quite an about face for both Dell and HP Enterprise.- HP acquired EDS for $13.9 billion in 2008, claiming the "combination of HP and EDS will create a leading force in global IT services."
- Dell acquired Perot Systems in 2009 for $3.9 billion, creating a "Comprehensive, Customer-Focused IT-Solutions Company."