DXC Technology: A New And Nuanced Vision For Digital Transformation

On April 1, 2017, HP Enterprise and CSC completed their merger and gave birth to DXC Technology, a new entity that is a mix of very strategically thought out focus areas and merged teams that will help clients complete a seamless digital transformation across verticals and domains. This is a uniquely new entity that is actually deep in domain expertise and rich in experience, giving it a unique positioning and advantage in the space when compared with contemporaries.

DXC Technology
Image Copyright: DXC Technology

Shareholders of CSC received one share of DXC for each share of CSC. HPE shareholders received 0.086 shares of DXC for each share of HPE held as of March 20, 2017, the record date.Post merger, legacy shareholders of CSC own 49.9% stake in DXC and shareholders of HPE own 50.1% stake in DXC.

We spoke to the company executives and they forecast a first-year revenue range of $24 billion to $24.5 billion. The strategic move to merge was first announced in May 2016, at that time, Chairman, President, and CEO Mike Lawrie, when talking to the media, called it a “natural first step” in the restructuring plans for both CSC and HPE, spurred by various factors that were making the individual companies come under pressure to unite and realign this way.

DXC executives are focusing on three key and primary strategic priorities that they see to be driving their business through 2020, starting with a focus on businesses’ digital transformations by combining their service offerings with those of their vendor partners. One of the merging firms, CSC invested $500 million in its digital offerings in its last two fiscal years and made a “huge” investment in partners that could help them deliver, such as Dell, Microsoft, HPE and Amazon Web Services.

The second important executive priority is to invest in and grow the company’s “next generation” talent, focusing more heavily on the skills – internal to the company and even outside contractors – so that they can deliver digital transformation projects. They have a unique HR development process that has very granular focus on skill building using innovative methods like internal bidding by individual resources for projects and consistent showcasing of new skills by building prototypes and incrementally improving them, supported by a strong and result-driven internal mentoring processes.

Last but definitely not the least, DXC is aiming to quickly attain “stable” revenue growth, ambitiously but confidently targeting 1 to 4 percent annually through 2020; thay are also looking at “sustainable” margin expansion that will allow them to continue to invest in their own digital offerings and assets; and a structured approach to capital allocation that will allow them to pump money back in the business and drive a 30-percent return to shareholders.

DXC told us that it sees a very possible combined annual growth rate in the digital market of 25 to 30 percent by 2020, with a total addressable market of more than $90 billion that it is going to take on in a quick ramp up phase.

The company has laid down very clear verticals and sub-domains within each. Each of these has a clear and defined delivery charter and properly laid down process frameworks to enable smooth execution. It will be good to see where this strategic merger of two experienced entities goes, they have created a new but not very new entity that is poised to grow. We will be following DXC closely to keep you updated on this.

 

 

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