BHP IT sale signals services market squeeze

The services market is continuing to move towards consolidation, and the battle between Electronic Data Services and Computer Services Corporation to acquire BHP IT is not likely to be the only showdown this year.

"As a general trend, big players are going to acquire more specialised and local service providers," Rolf Jester, research director for Gartner Group's Dataquest, told Computerworld. "We foresee much more consolidation.

"In an increasingly global market, very few brands can attract sufficient attention and market share. People want flexibility and brands that a big player can deliver," he said.

Merv Langby, market analyst at IDC, said either Computer Services Corporation (CSC) or Electronic Data Services (EDS) would deliver BHP IT the resources, global exposure and strategic direction needed to grow its business.

But he warned CSC could face "a major task" absorbing BHP IT's $300 million business and 1500 staff if it won the deal because it has just completed the local acquisition of GE Capital IT Services.

BHP confirmed last week that it had narrowed its search for a prospective buyer for its services spin-off BHP IT down to global heavyweights CSC and EDS, with a spokeswoman from BHP IT stating an outcome on the deal can be expected by the end of May.

Computerworld understands up to six companies, including IBM Global Services Australia, were originally approached to bid for the deal.

BHP IT currently holds a 3 per cent market share and is ranked about ninth in the local services market, according to Gartner's most recent figures.

However, Jester said that while BHP IT has been one of the larger local players in the services market, it has slipped marginally in the last year or two.

According to the BHP spokeswoman, 60 per cent of BHP IT's business is with BHP itself, while the rest is conducted with external customers.

The spokeswoman would not value the deal, but industry sources estimated it was likely to be worth several hundred million dollars.

Spokespeople from both EDS and CSC confirmed that they had been notified of the shortlist but refused to comment further until a final decision is made.

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