How does a history major get to run a US$24.6 billion (S$34 billion) information technology services company?
It is a question he has asked himself, concedes Mr Mike Lawrie, chairman, chief executive officer and president of DXC Technology, the company born of the April 2017 merger between CSC and the enterprise services division of Hewlett Packard Enterprise, or HPE as it is called these days.
While he did go to graduate school for a business degree, the history part is useful because, after all, it is all about leadership styles and how leaders dealt with the complexities of the day. Effective corporate leaders need to have a broad understanding of how the world has worked and how patterns tend to repeat themselves, he says.
Over his four-decade-long career in business – including more than a quarter century with IBM, where he was mentored by the likes of Lou Gerstner – Mr Lawrie, who was recently named 31st on the Harvard Business Review’s list of the top 100 global CEOs, has had a ringside view of the ebbs and eddies of tech currents.
In the 1990s, it was about the Y2K phenomenon and the tech boom. These days the world is consumed by the swift march of digital technologies, advanced analytics and bionics, the study of mechanical systems that function like living organisms. Indeed, the D and X in his company’s name, he says, stand for digital and transformation in a world where social media, robotics, drones and artificial intelligence are transforming not just companies but countries themselves.
DXC’s birth, he says, is emblematic of the industry consolidation that is inevitable as corporations swivel to confront the new landscape. Not too long ago, the big innovations in tech services had been to move high-cost jobs to lower-cost areas, chiefly India. But, as routinised jobs become automated, that leverage is fading. Scale becomes important not only to lower unit costs but also to enable effective competition on a global basis.
“A bigger platform would help us implement our business-partner strategy and become more important to other technology players like Microsoft, AWS, SAP and others because we are so big,” he says. “The other reason was customers needing an independent tech services firm to help them in their digital transformation journeys. It is rare that all these things line up as favourably as they did. It is still early stages, but we are very pleased with how the integration has gone.”
This month, the company reported fiscal 2019 second-quarter net income of US$262 million, or 92 US cents a share, compared with US$256 million, or 88 US cents a share, in the year-ago period. Revenue declined to US$5.01 billion from US$5.45 billion in the year-ago quarter. Since Wall Street had forecast revenue of US$5.3 billion, shares dropped.
“When we put the two companies together, we had indicated that our revenues would decline moderately for a couple of years as we integrated,” Mr Lawrie told me in a lengthy conversation that took place before the Q2 results announcement. “More importantly, some of our legacy and mainstream businesses are declining while a lot of new businesses like digital are beginning to grow rapidly.”
He says it would be no surprise that revenues should be flat or decline for a couple of years and, while there would be no big spurt, he does see growth ahead, based on both organic growth and acquisitions. Add US$400 million to US$600 million a year and you could be looking at a US$25 billion company in five years, he says.
Meanwhile, as he drives efficiency and cuts slack – many think HPE, particularly, had become rather wheezy in recent years – the year past has been a wrenching experience for some 30,000 staff who had lost their jobs. The most notable casualty was DXC America’s head Karan Puri, who joined the firm in January only to leave last month. Indeed, on the Glassdoor website, where employees and former employees anonymously review companies and management, there are harsh comments on Mr Lawrie.
How does it feel when you see comments on Glassdoor such as “Hitler died and Mike Lawrie was born”?
“To tell you the honest-to-God truth, it doesn’t bother me too much,” says the 65-year-old Mr Lawrie. “When you are in an industry and business that is constantly changing and evolving, you cannot let people that don’t want to evolve or change impact the rest of the body, because that would be the minority terrorising the majority. If I don’t do that I actually hurt far more people down the road.”
Meanwhile, hiring for the faster-growing business areas continues and there is an attempt to reskill thousands of staff. Last year, the internal “DXC University” spent a million man hours in training, using both virtual and physical methods. Many of those courses were certification programmes of partner companies such as AWS and ServiceNow.
DXC has some 60,000 people in Asia, two-thirds of them in India which is home to two of the six DXC digital transformation centres worldwide.
Those staffing numbers, he says, will grow, in part because of the intellectual capital being created in the Asian region in countries such as the Philippines and Vietnam, and of course, India.
“Asia is no longer just the back office and location for cheaper work. The number of Asian computational, informatics, analytical and data science skills entering the market in the next 10 years dwarfs those set to graduate in the US and European Union.”
I ask about his three biggest challenges running the merged company and he begins with people, especially against the background of the skillsets required for the next generation of companies. The other is leadership: finding the managers who can conceptualise the business differently from past ways. And then, of course, is the inherent conflict of managing a side of the business that is declining while another side is growing.
Mr Mike Lawrie is chairman, president and CEO of DXC Technology. He was ranked 31st in Harvard Business Review’s 2018 ranking of the world’s top-performing CEOs. He is 65 years old.
Mr Lawrie was previously chairman, president and CEO of CSC. Before that, he spent 27 years with IBM, where he rose to senior vice-president and group executive, responsible for sales and distribution of all IBM products and services worldwide. From 1998 to 2001, he was general manager for IBM’s business in Europe, the Middle East and Africa. Prior to that, he served as general manager of industries for IBM’s business operations in Asia-Pacific, based in Tokyo.
His previous corporate board service has included Juniper Networks (lead director), SSA Software, Symbol Technologies, Good Technology and the NTT DoCoMo USA advisory board. Mr Lawrie holds a BA in history from Ohio University and an MBA from Drexel University.
Mr Lawrie and his wife have a son and a daughter.
DXC Technology, a Fortune 500 company, was formed by the merger of CSC and the enterprise services business of Hewlett Packard Enterprise (HPE). It describes itself as an “end to end IT services and solutions company”. Headquartered in Virginia, US, it has 134,000 employees. DXC reported US$24.6 billion (S$34 billion) revenue for fiscal 2018 and a return on equity of 16 per cent.
DXC’s digital workplace solution – which links mobility and standard desktops for a new world of employee productivity and connectivity – is apparently getting traction. Recently, says Mr Lawrie, DXC implemented it for the automaker BMW’s worldwide operations, linking some 150,000 users in the first phase. Another partnership doing well is with the on-demand cloud-computing platform AWS, short for Amazon Web Services.
Many of the CEOs I have met recently, such as Mr John Donahue, who moved from eBay to ServiceNow, and Mr Francois Locoh-Donou, who moved from Ciena to F5 Networks, seem to see their future with niche companies and I wonder if a big buffet-offering company such as DXC would have a future.
Mr Lawrie responds that whenever technology moves to a new generation, it is inevitable that many corporate flowers such as ServiceNow and Salesforce bloom. But, ultimately, these companies have to interface with the traditional IT world.
“The unique value proposition of DXC is that we know how to do this,” he says. “We are the largest partner of ServiceNow and Microsoft Dynamics. We integrate those two worlds. We can provide the integration that then allows the company to scale. The smaller, niche companies cannot do that.”
DXC itself is transforming as it adjusts to the landscape.
“We are huge users of ServiceNow, AWS and Microsoft365 and we are installing our Digital Workplace globally because we want our people to use it for the same reason we recommend these to our customers. We call ourselves ‘Client Zero’,” he says.
Mr Donald Trump’s climb into the US presidency has come with a lot of noise about reshoring and onshoring jobs. How does that play with DXC, which has half its people overseas?
“I wouldn’t say it has changed our business strategy but it has given us some other things to think about,” he says. “We put down a digital delivery location in New Orleans and did a deal with the state of Louisiana. We did some tax things and committed to creating jobs there.”
The sports-loving Mr Lawrie – he cycles, hikes, runs, golfs and plays tennis, in addition to boating – says he likes to live in different parts of the US at different times of the year. He is also creating a programme at his alma mater, Drexel University, to teach graduate students some of his own learnings.
I asked him what he had himself learnt from Mr Gerstner, the legendary CEO who turned IBM into a technology services company.
“The most important lesson I learnt is that you cannot outsource your thinking. Often, as you go up in any industry, you tend to rely on other people to do a lot of the thinking and you become a picker and chooser of ideas. You can’t ever really do that. You have to think things through yourself.”
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