Hitachi Data Systems announces restructuring

Mainframe maker Hitachi Data Systems will lay off 600 employees as part of a major reorganisation that was announced yesterday.

Under the new structure, Hitachi Data Systems will be divided into two independent companies: a platform-specific company called HDS, and an independent systems integration company called Hitachi Data Systems Solutions (HDSS).

Each company will have its own profit-and-loss responsibility and will report to Hitachi Data Systems Holding Company, which is incorporated in Delaware.

Most of Hitachi's mainframe and storage business will now be housed under HDS, which will be comprised of six business units. The units comprise:

-- Platform Solutions, which will be responsible for software, services and storage-area networks.

-- A platform channel unit that will sell not only Hitachi's hardware and software, but also technology from other vendors, such as Brocade Communications Systems and Cisco Systems, both in San Jose, and Hewlett-Packard.

-- An business unit that will sell Hitachi servers and service to other vendors.

-- A 700-person customer-service organisation that will offer a range of configuration, delivery and installation service for Hitachi's own customers, as well as those from other vendors.

-- An information technology services group, comprised of Hitachi's 50-person internal IT organisation. The group will try to sell a range of services, including application-hosting services.

-- An incubator business unit focused on finding new opportunities for HDS.

Hitachi's newly minted Solutions company will continue providing business consulting, application-layer services and systems integration services.

The reorganisation will allow Hitachi to better leverage its technology resources, said Dave Roberson, chief operating officer at HDS in Santa Clara, California. Organising the company into independent businesses will make it more streamlined and allow it to respond faster to market needs, he said. Each unit will have the ability to seek its own partners and acquire funding separately, including public offerings.

The goal was to create a "more manageable set of businesses," Roberson said.

However, the actions will have little impact on existing Hitachi customers, he said. That's because most of the 600 jobs being cuts are administrative positions.

Hitachi's latest action comes on the heels of its recent decision to scale back production of its mainframe systems. Hitachi held a 21 percent market share as recently as 1997, but it dropped back to 14 percent in 1998. It did even worse last year, in a field that includes IBM and Amdahl in Sunnyvale, California, according to Stamford, Connecticut-based market research firm Meta Group.

Hitachi's restructuring "makes a lot of sense... because they were not achieving the success (selling mainframes) they were hoping to," said Mike Kahn, an analyst at The Clipper Group.

The reorganisation "frees Hitachi from being just a product vendor to being more of a product integrator, delivering solutions that might in fact have little to do with their traditional core products," Kahn said.

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