CSC, HPE Execs Ready The New DXC To Tackle Digital Transformations
Just days before their company flips the switch to become DXC Technology, top executives of CSC promise a focus on their clients' digital transformation efforts.
The executives, led by CSC Chairman, President and CEO Mike Lawrie, rolled out their plans for the new company on Wednesday before investors. DXC will debut April 3 after CSC's merger of the Enterprise Services division of Hewlett Packard Enterprise.
Leading clients' digital transformations is one of three strategic priorities for the new company. "What we're beginning to create now" is the ability to … "offer our clients the opportunity to reduce their costs within their traditional infrastructure world," Lawrie said. That will allow them to invest their savings in DXC's expertise and digital platform offerings.
When its customers spend those saved dollars, Lawrie added, DXC can boost its margins, allowing it to reinvest in the business.
CSC has seen the changes to its revenue structure in recent years. In a two-and-a-half hour presentation to investors, company officials said they foresee a 25 percent combined annual growth rate through 2020 on digital technologies and a 4 to 7 percent decrease in the market for its traditional IT offerings. Meanwhile, DXC forecasts an increase of 7 to 10 percent in its industry-focused work and business process services over the next three years. Lawrie called that a "big addressable market."
For the new company's first full fiscal year of operation, DXC executives foresee annual revenue of $24 billion to $24.5 billion, with annual revenue growth of 1 to 4 percent through 2020.
The merger and rebranding will create what the executives are touting as "the world's leading independent, end-to-end services company."
"This is about the future. This is about building a leadership position in the industry," Lawrie said. "This is about something entirely new."
Another strategic priority will be to invest in and grow the company's next-generation talent, with a focus on people, skills and new ways to source talent, especially contractors who prefer to work for themselves. DXC says its talent pool, no matter how the company fills it, can help clients that are dealing with today's technology skills gap.
"It's all about access to skills, and it's moving from, not what clients need, but how they're going to get work done," said Mike Nefkens, an executive with HPE's Enterprise Services who will be executive vice president and head of sales for DXC. "There is a massive gap between what needs to be done and how it needs to get done."
That ushers in what Nefkens labels "outside-in innovation," in which businesses have to get outside help because they don't have the skills in-house to handle a digital transformation undertaking.
"You can't do it alone anymore," which means that clients that traditionally haven't used service providers will have to turn to companies like DXC "that have the skills and processes and have done a lot of these digital transformations already," Nefkens told investors.
On the operations side, Lawrie conceded that the merger would create some initial "dis-synergies," but officials are planning to streamline the organizational structure through several moves, such as the consolidation of redundant roles and improving productivity through automation.
Meanwhile, DXC plans to look at its use of build what it calls "in-country low-cost delivery centers." It plans to cut from 17 to eight the number of its low-cost centers around the world, but will "most likely" add a site in the United States, Lawrie said in response to a question. (The company is looking at three states for the site and has "begun the negotiation process," he added.)
While Lawrie acknowledged the current "political sensitivity" about shifting business assets outside the U.S., he stressed that only $50 million of DXC's plan to improve margins by $1.6 billion through 2020 is tied to moving resources out of the country. "More importantly, it's just good business."
He also said that CSC does not have "the turnover rates in some of our lower-cost centers in the United States that we have in India."
In response to another question, Lawrie said, "This is not just a cost take-out play … it also gives us an opportunity to re-invest for the future."
Meanwhile, the sales side is ready to go, said Nefkens. "Our teams are trained," and the new company's go-to-market strategy is "already showing momentum."
"We've been busy the last nine months ... putting this together and getting these operational plans ready to go," Lawrie said. "These plans are locked. [On April 3,] we turn the key, and we start to drive the road."
Investors responded positively Wednesday to CSC stock, which rose 5.28 percent, or $3.65, on the New York Stock Exchange to close at $72.72 a share.