Does HP keep IBM up at night?

It's no secret that HP and IBM continue to race neck-and-neck toward being the world's largest technology vendor. And HP couldn't be more open about its intention to knock IBM out of any top spot it may hold with acquisitions such as the pending $13.9 billion EDS buy.

The EDS deal would double HP's services revenue and make the vendor the second largest in the IT services market, ahead of Accenture and CSC, yet still behind Big Blue. Still financial analysts point out the buy, which looks good on paper, won't bring instant services success to HP. For one, HP will be challenged to restructure EDS in such a way to successfully compete against a global delivery IT services business IBM has worked to establish for between five and seven years. EDS workforce will have to be moved offshore to adequately compete, and HP will have to work hard at integrating the two cultures in a timely manner.

IBM executives seem confident that the EDS acquisition will significantly challenge HP and the potential success is limited. When asked, IBM executives politely dismiss HP's aspirations. Yet one industry watcher says that IBM could afford not to worry in the past about HP's moves to take IBM market share pre-Mark Hurd. But now with Hurd at the helm, IBM executives have got to pay attention to HP's aggressive acquisitions. HP has been strong in its strategy and vision, but it could be said the vendor has fumbled when executing its acquisitions. Not any more.

"Hurd is an execution animal," this industry watcher says. "It has to keep IBM up at night worrying about HP's next move."