Implementing Portion Control at CSC

This week’s announcement that CSC would be dividing into two new entities, one for US Public Sector contracts and the other for Global Commercial contracts is a welcome and necessary step. CSC is a capable, trusted veteran of the services industry but it has been disappointing the market for some time now. Lacking the scale of IBM and HP, the brand of Accenture and the overhead structure of leading Indian heritage service providers it has been stuck in a poorly defined market position.

CEO Mike Lawrie has been pulling all the available operational levers since his arrival, by putting CSC back on a sounder financial footing, recruiting new executive talent, streamlining the offerings and building the partnerships required for success in the As-a-Service economy. However, those levers still are not enough and without access to new investment capital to build global sourcing and new technology resources as well as a further refinement of the strategy we wonder how CSC can compete in an increasingly globalized, industrialized and automated market.

CSC’s large and challenging public sector contracts acted as a virtual “poison pill” limiting who could take a stake in the combined entity. Breaking this off will free the leadership to further shape the business than they have been able to so far.

CSC has carved itself up into a more manageable portion that will in HfS’s view make each entity an attractive investment target that it turn will maximize the return for current shareholders. The most likely candidate for the Global Commercial entity is a Japanese service provider and for the US Public Sector portion we envision a PE firm.

Yet if the goal of this action is to do more than just make it easier for each part to be acquired on its own then we think CSC for the enterprise market needs to do the following:

• Ignite the enterprise sales engine and refine operational processes to make it easier to contract with CSC for deals of all sizes
• Invest in the brand so that it stands for something more in the As-a-Service Economy
• Look at much larger acquisitions of their own if they want to create momentum and bring in new capabilities. Infochimps and ServiceMesh were strategically sound and brought new leadership into CSC but on their own they aren’t enough to move the entire organization.
• Finally, HfS believes they should double down on emerging markets such as Digital and IOT in concert with the rebranding. There are no clear leaders yet in this space and there is still an opening for CSC but it needs rapid and decisive actions on the part of this slimmed down CSC Global Commercial to make this happen.