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HP's big splash on EDS all about shrinkage

Hurd 'The Butcher' gets out his knife

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The Extra Dash of Smarts

The $12bn marketing gamble only pays off if people really start consolidating on a massive scale, and they will.

There's no doubt that a certain class of applications will move to the utility computing model. These are the boring applications that you're already pulling off Unix boxes or lots of x86 systems and slotting on a couple of four-core Xeon machines. The process of moving all that code to utility services will take a very, very long time. You have to convince customers it's a safe and economical venture.

Most companies will try and reorganize their own operations before reaching that utility computing end point. So, that's customer X looking to get rid of gear and then gradually moving applications into the fabled cloud over many years.

Along the entire utility computing journey, HP can now offer some theoretically stellar consolidation services because, damn it, it's the expert at this stuff.

That's a pretty savvy play since the server makers are already losing out on hardware sales today thanks to better machines and virtualization code. HP can at least make as much money as possible off the shrinkage.

This may all seem basic enough, but I think there's some richness and complexity to HP's story.

Sun, for example, talks a lot about the boring applications which are consolidating and the interesting applications - high performance computing stuff, massive databases, SaaS pieces - that demand as much horsepower as possible. Thing is, Sun only really cares about catering to the latter crowd. It wants to sell more and more boxes all the time. The consolidators are no good to it.

Dell would like very much to have some of the consolidation action, but its services business is small tamales compared to HP's or IBM's. When Exxon or Pixar or GM want to shrink the hell out of their data centers are they going to turn to Dell or to HP, which revamped itself and then freaking EDS?

And versus IBM, well, HP's acquisition of EDS may help it put a fresh face on super-hyper-global-mega services.

See, Hurd The Butcher has turned cost-cutting into a religion. He's - dare I say it - put the, er, sexy back into consolidation. (Ouch - Ed.) Or at least he's going to once he's done revamping EDS.

But seriously, you can see where this is heading. Hurd will offer the Fortune 2000 a little piece of himself - a chunk of that magic that's done so very much for HP's share price and bottom line.

All Hurd has to do to pull all this off is ensure that the EDS swallowing is a success. That means no prolonged charges hitting HP's earnings. It means no technology integration disasters. And it means streamlining EDS's internal IT operations as quickly as possible.

Should all go according to plan, mark my words: Hurd The Butcher will come to consolidate you. ®

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