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CSC to DXC Technology – Plus Ca Change…


DXC Technology recently held an analyst day in the U.K., its first since being ‘born’ on April 1. It is still early days for this young organization and the integration continues (though there was little mention of this at the event). In its recent investor calls, DXC Technology has emphasized actions to strip out costs, apply financial discipline, and invest in next gen offerings, around digital and Industry Solutions and BPS.

Focus on Smaller Transactions…

It is evident that CEO Mike Lawrie is continuing the strategy he adopted at CSC with DXC. DXC has a different positioning than its legacy might suggest, having come from three of the four largest IT outsourcing firms (CSC, EDS, HPE ES) headquartered in the U.S. DXC does not consider itself to be a large IT outsourcing specialist, focusing instead on small to mid-sized contracts, cross-selling, and winning new logos, rather than being large transaction-based. This is the journey that CSC had been following in recent years.

To accompany this commercial emphasis on smaller transactions, DXC has transitioned its sales structure towards more technical sales. To this effect, DXC has adopted a two-in-a-box structure, with account managers complemented by a technical sales force aligned by service offerings. DXC is investing in online training for its account managers, targeting annual certifications, focusing on mastering the service portfolio, and also in taking a more consulting-led approach, taking a “client challenge”-centric view.

… and on Next Gen Services

Another priority for Lawrie during his tenure as CEO of CSC was building the portfolio of “next gen” offerings, and the transition towards more packaged and more repeatable services. This journey clearly continues with DXC.

DXC has reduced its service portfolio and number of offerings to under 100. In the past few months, DXC has unveiled several packaged offerings, including its series of 40 QuickStarts. DXC wants to maintain this level of discipline about its service portfolio: as the CEO of DXC in the UKI region pointed out, "if we need to create new offerings within each service line, we will have to carefully review the existing ones, and decommission a few".

Along with the streamlining and refresh of its service portfolio, DXC continues to work on increasing global delivery, and making it more industrialized, including applying RPA, AI and analytics. In its Workplace and Mobility unit, DXC is taking a systematic approach in identifying where its differentiation lies for each of the offerings, and is filing patents.

The next gen focus is taking a continuous improvement approach with the portfolio: once it has provided a similar solution/service to five to ten clients, the drive is to move to an industrialized delivery and packaged offering, making use of Indian delivery and its CoE approach.

Acquiring for Digital Capabilities

As part of its portfolio refresh, DXC has added two fast-growing service lines, Analytics, and Security, to the much larger Cloud, Platforms and ITO (CIP), Workplace and Mobility (WM); and Application Services (AS) units. The challenge with these units appears to be finding resources to meet market demand. Both Analytics and Security have a scale of 4k-5k personnel (NelsonHall estimate). NelsonHall will be publishing an analysis of DXC Analytics soon.

M&A is clearly part of the strategy, again continuing what CSC has been doing to jump start its Enterprise Cloud Applications, largely around Microsoft Dynamics (UXC Eclipse, eBECS, Tribridge) and ServiceNow (UXC, Aspediens, Fruition, and last week Logicalis SMC).

It is very clear that DXC is a very pragmatic firm. Do not expect big announcements about 'state of the art' offerings, or new business models. DXC is focusing on continuous improvement and on applying proven techniques to increase shareholder value, rather than seeking to reinvent the model. The approach Lawrie took at CSC continues at DXC. The latest example: this week, DXC announced the divestiture of its U.S. government services arm in a move that replicated the spin-off by CSC of its NPS organization two years ago. Rachael Stormonth published an analysis of this transaction here.

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