BHP IT purchase propels CSC to No. 2

CSC's (Computer Sciences Corporation) purchase of the information technology division of BHP will catapult CSC into the second largest Australian IT service provider with big contract credibility, according to analysts.

It also points to a growing trend of consolidation in the marketplace said Rolf Jester, principal analyst at Gartner.

"It leads to an interesting situation where the top three service providers are within a per cent of each other," Jester told Computerworld.

"The acquisition puts CSC in a strong position to bid for big contracts such as Westpac and Centrelink." And industry analyst Len Rust also believes the acquisition may bolster CSC's chances in the bidding process for the Westpac outsourcing contract, "now it has [former] BHP IT staff coming on board". Rust said he believes the sale may also give CSC more credibility in the supply chain management area where companies are re-engineering.

CSC is to provide integrated IT services to BHP for an initial seven-year term, equating to a 20 per cent reduction in the cost to BHP over this period.

Also as part of the sale CSC will gain the 1700-strong division of BHP IT. The transaction follows the sale of other non-core divisions at the Big Australian over the past year, including engineering, power and insurance businesses.

"This sale provides the delivery of world-class, low cost external IT services to BHP's global business operations and will enable BHP IT employee to further develop their widely acknowledged skills and experience in a globally-recognised information technology business," said Kirby Adams, former BHP services president.

Although BHP's managing director and CEO Paul Anderson said he recognised IT was not part of BHP's core business, he added "we are committed to ensuring our organisation is fully e-enabled within the next two years.

"We will work in partnership with CSC to facilitate that transformation," Anderson said.

And CSC's skills and experience will also be fleshed out as a result of the personnel transfer, said Rust, pointing to CSC's history with AMP and GE Capital.

"CSC's background is steeped in applications and services," Rust said.

According to Rust, this will hold the company in good stead as industries start to "rethink sales and marketing channels, leading to re-engineering of supply chain processes." BHP sold its IT department to CSC late last month for $75 million cash and a $700 million services delivery agreement.

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