In the latest consolidation in the IT industry at the top tier, HP announced a definitive agreement to purchase IT services company EDS for $13.9B. There are many views on why HP would make this move, but to me the obvious play is in the “cloud” computing model that is emerging. EDS’ principal business is in the outsourced operation of data centers and it’s only a small step from outsourcing to cloud sourcing.
What’s the cloud you ask? It’s pretty simple, it’s when a business makes the choice not to own and operate its own computing infrastructure and instead procure compute cycles and storage from networked based services. The best present examples are Amazon’s EC2 and S3 compute and storage services at an infrastructure level and Salesforce.com at the application level.
While there is an obvious revenue combination and cost synergy, the basis for this acquisition really is to allow HP to establish a leading position as businesses, particularly small businesses, they migrate toward consuming network-based computing services.
