CSC has beaten rival EDS to successfully acquire BHP's spin-off services company BHP Information Technology (BHP IT) in a deal worth more than $700 million.
The deal, which includes a $75 million up-front cash component, also comprises an IT outsourcing contract for the services giant and the sale of BHP's Indonesian-based information technology business.
In the outsourcing contract, CSC will provide integrated IT services, including consulting and systems integration, to BHP for an initial seven-year term for over $700 million. The contract is expected to generate a 20 per cent reduction in services costs normally provided within BHP, the mining company said.
Under the deal, which is effective from June 1, BHP IT's 1700 staff will be transferred to CSC, bringing CSC's Australian staff count to 5700.
The move will catapult CSC into the position of second-largest Australian outsourcing and services company in front of EDS, according to Len Rust, industry analyst and executive director of Dialog Management Technology.
"The sale may also give CSC more credibility in the supply chain management area where companies are re-engineering and where a lot of activity will occur in the near future," Rust told Computerworld.
The transaction follows the sale of other noncore divisions at the Big Australian over the past year, including engineering, power and insurance businesses.
And CSC's skills and experience will also be fleshed out as a result of the personnel transfer, Rust said, pointing to CSC's history with AMP and GE Capital.
"CSC's background is steeped in applications and services," Rust said.
According to Rust, this will hold the company in good stead as industries start to "rethink sales and marketing channels, leading to re-engineering of supply chain processes."
Rust also believes the recent acquisition may bolster CSC's chances in the bidding process for the Westpac outsourcing contract, "now they have 1700 BHP IT staff coming on board."
"Our agreement with BHP is a major milestone for CSC in Australia," CSC chairman, president and CEO Van B Honeycutt said. "Our relationship with BHP provides us with an entry into the robust industrial market in Australia and is a foundation for future expansion."
"This sale provides the delivery of world-class, low cost external IT services to BHP's global business operations and will enable BHP IT employees to further develop their widely acknowledged skills and experience in a globally-recognised information technology business," said Kirby Adams, former BHP Services president.
BHP managing director and CEO Paul Anderson said that in addition to providing key services support to BHP, CSC would work closely with BHP as it moves into the internet world.
"We are committed to ensuring our organisation is fully 'e-enabled' within the next two years and we will work in partnership with CSC to facilitate that transformation. The evaluation process has ensured a common understanding of our business goals and we look forward to our ongoing alliance with CSC," Anderson said.