Up close and personal with a merger

What can you get for 13.9 billion buckaroos? For Hewlett-Packard, US$13.9 billion would allow you to buy your way into becoming the second biggest IT services company in the industry.

HP this week confirmed plans to acquire EDS and deepen its reach into the services market.

Having generated US$22.1 billion in revenue last year, EDS would more than double the size of HP's service business, currently worth US$16.6 billion. When merged, HP's resulting US$39 billion services business would still be smaller than IBM's global services business--which generated US$54 billion in revenues--but would narrow the gap significantly and put HP-EDS as a "clear No. 2 in IT services".

That's a huge score for HP--if, and that's a big if, the company succeeds in the integration process. Some analysts have already suggested HP's relaxed Silicon Valley culture is vastly different from EDS' more restrained, formal corporate environment. "There's bound to be a lot of tension and conflict," says one analyst.

In mega mergers like this one, it's sometimes too easy to overlook the importance of ensuring employees in both companies are able to work well together. It's a "soft" business issue, and not something that usually comes up in the boardroom when deals and mergers are being inked.

It is the people that make, or break, the company. Your organization may offer the best technology and product in the market, but it's the employees who have to go out there, face the customers and sell that piece of technology. And it's your helpdesk engineers who have to appease irate customers and persuade them from switching to a competitor when they encounter problems with your technology.

When two big companies merge, employees from both camps will inevitably feel uncertain about what the union will mean for them. Will they still have their jobs? Will they get along with their counterparts from the other side? If the other company is based in the U.S. or Europe, does it view Asia as a strategic market?

If unaddressed, the uncertainty could lead to an exodus of talent and the clientele of both companies might leave along with the departing employees.

EDS can probably take some comfort in the fact that HP has had experience dealing with difficult mega-mergers, specifically, its Compaq acquisition, and managed to come out of it alive and kicking, in spite of the odds. HP employees in Singapore are probably also rejoicing as the merger has reopened the company's door into the government's SOE project.

My colleagues at CNET offices worldwide, including the team here in Singapore, are perhaps facing a similar situation today, following the announcement Thursday that our company will be merging with American broadcast giant CBS in a deal worth US$1.8 billion.

How do I feel about this union? Just one question, when can I meet my new colleagues from CSI: Las Vegas?

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Eileen Yu

Eileen Yu began covering the IT industry when Asynchronous Transfer Mode was still hip and e-commerce was the new buzzword. These days, she gets stirred up over issues concerning Internet regulation, intellectual property rights and software patents, online privacy and data protection. Eileen is senior editor at ZDNet Asia, where she oversees the business tech news site.