Why CSC split makes sense?

IT services provider CSC announced its plan to separate the company into two — one will focus on commercial and government clients globally and one will serve public sector clients in the U.S.

CSC – Global Commercial will partner with Fortune 1,000 companies and non-U.S. government clients. It had $8.1 billion revenue in FY 15. CSC Global Commercial will have more than 1,000 customers including 175 of the Fortune 500, 51,000 employees and 34 delivery centers globally.

CSC – U.S. Public Sector will offer IT, infrastructure and business services to U.S. federal, state and defense agencies. CSC US public sector business had clocked revenues of $4.1 billion in FY 15 and employs 14,000 people, including 3,500 U.S. military veterans.

CSC CEO Mike Lawrie said: “Our turnaround has progressed strongly, and our focus now turns to positioning the business for long-term growth and leadership. The best way to accelerate that transformation is by separating the company into two businesses, each uniquely positioned to lead its market by focusing strongly on the needs of its clients.”

CSC CEO Mike Lawrie

CSC is finding two distinct set of clients in the U.S. public sector and globally. On the commercial side, enterprise clients seek partners with a deep understanding of their business who can help lead their digital transformations.

In the U.S. public sector, technology demands are increasing, and clients want providers with specific experience in government-focused innovation.

By separating, each business will have the scale – among the largest in their respective categories – as well as the focus to meet unique customer needs and market requirements.

The separation will allow both companies to optimize their capital strategies and cost structures, and will provide investors with distinct long-term investment opportunities. CSC did not talk about any possible job cut or increase after the split.

As two independent organizations, each business will be better positioned to recruit and retain the best IT talent.
CSC will decide leadership, locations and other details shortly.

Meanwhile, CSC said Global Business Services revenue declined 7.6 percent to $980 million in the quarter — driven by contract completions and the ongoing repositioning of the consulting business, partially offset by growth in new offerings.

GIS revenue fell 14.8 percent to $929 million.

North American Public Sector revenue was $1 billion, flat on both a sequential and year-over-year basis. Growth in state health IT, NextGen IT such as Cloud, and business process outsourcing work offset declines in other Department of Defense and federal civilian contracts, said CSC.

Baburajan K
[email protected]

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