DXC Technology has announced a new “strategic partnership” with Google Cloud.
“This partnership will allow us to modernize mission-critical IT for enterprise clients and integrate digital solutions capitalizing on the Google Cloud Platform,” said DXC CEO Mike Lawrie during the company’s earnings call Thursday. “Under our partnership agreement, DXC will also be launching centers of excellence for Google Cloud Platform and Google Cloud Artificial Intelligence to provide clients with secure, agile and scalable cloud-based digital platforms that leverage our advanced analytics capability.”
Lawrie told investors that with the addition of Google, DXC can now offer customers all of the leading cloud platforms, products and services. A year ago, Lawrie unveiled the DXC-AWS Integrated Practice that delivers IT migration services. Then in July 2019 the company announced a partnership with Azure.
“The Microsoft Azure and Google Cloud practice compliment our ongoing cloud work with AWS, Oracle, and VMWare to give our clients access to the largest cloud providers in the world,” he said.
During the call, Lawrie said DXC is seeing strong momentum in cloud infrastructure solutions. He said the business grew 36 percent year over year, with customers seeking cloud migrations, as well as multi-cloud solutions. Lawrie said the rapid move to the cloud is “industry specific” with consumer packaged goods, for example, migrating more rapidly to the cloud than financial services or insurance. Overall, however the company is seeing more rapid adoption of the cloud infrastructure in their top 200 or 300 clients.
“We’re seeing good traction in this business across geographies and across industries,” he said. “For example, we won a deal with a major European aerospace and defense company to provide cloud migration and security and analytics. We’re leveraging our knowledge of the legacy estate to modernize the clients IT architecture and help them thrive in an highly competitive market.”
DXC’s enterprise cloud apps and consulting business also grew by 17 percent year-over-year, with strong momentum in the Americas region off the company’s Microsoft, SAP, and ServiceNow practices.
But the move to cloud and to capture that revenue is hurting the company in the near-term, Lawrie said. The new business puts pressure on the traditional work as clients are lifting and shifting workloads to win immediate savings. Lawrie said as customers do away with the hardware needs that drove margins in the past, DXC will have to wait to recoup that from growth in their digital business.
“It's really tough when these volumes go away,” he said. “I mean you don't need as much many servers, you don't need as much storage, you don't need as much of this and that. That stuff doesn't move out in 60 days. It just doesn't work that way. It takes time to do that. But yes, as those costs come out, then that gives you a great opportunity for margin expansion on the new digital business.”
DXC posted another losing quarter as revenues for the first quarter ending June 30 came in at US$4.89 billion, 7.39 percent lower year over year. Net income was $168 million for a diluted earnings per share of $0.61. DXC’s share price plunged to its lowest-ever point, down $16.72 or 32.37% in Friday morning trading.
“We've got some very strong plans in place to recover,” Lawrie told investors. “I felt it was important to reflect what we saw in the first quarter that was different than what we saw exiting in the year. And that's what I am signaling. It doesn't mean we don't have plans in place to try to recapture the bulk of that, we do. But when you see a slightly different trend than what you saw, it's important to the investors to call that out. So yes, are we confident about that? Yes, we are.”