DXC Changes the Guard, Moves into Growth Phase

After an extensive search process, DXC Technology’s Board of Directors has appointed Mike Salvino as President and Chief Executive Officer, effective September 11, 2019. After seven years at DXC and its predecessor CSC, former president and CEO Mike Lawrie is retiring and remaining as DXC’s board chair until December 31, 2019. Salvino has more than 30 years in the IT industry, most recently in private equity. He spent 22 years at Accenture, including as group chief executive of Accenture Operations leading more than 100,000 people globally, while his division saw 20 percent revenue growth in his last year there.

In a call with financial analysts, Salvino spelled out what he called his operational playbook with three components:

1. People – treat them right, including giving them opportunities to advance.
2. Clients – help them rationalize and modernize their IT portfolios, including moving to the cloud. Harvest data through analytics and machine learning to give insights to clients to increase revenues and reduce costs.
3. Business – deliver innovation and accelerate client digital transformations while adding new clients. The leadership change coincides with a shift in focus from shaping the business via mergers, acquisitions and spinoffs to accelerating the business with a strategy to drive growth.

ISG thinks DXC offers a sound technology and services stack. In fact, ISG Provider Lens rated it as a Leader in ISG Provider Lens™ Private/Hybrid Cloud - Data Center Services & Solutions - Global 2019 - Managed Containers as a Service. DXC’s robust portfolio and strategic partnership with Red Hat OpenShift with Bionix™ platform have helped clients accelerate their development process.

DXC has a significant presence in several industries, including aerospace and defense, where it has a 47 percent account penetration, and in the banking sector where it has 19 percent penetration according to ISG Momentum® Market Trends and Insights 2019 Vertical Report. To protect that presence, DXC needs to move faster and help its large clients accelerate their digital transformation initiatives.

But the service provider market is changing, with a move away from mega deals that tier one providers such as DXC have traditionally bid and won. As we’ve described in the ISG Index™ several times, renewing services deals will be tricky because clients are engaging more often in smaller deals if they renew at all, which is no guarantee. According to ISG Research, more than half of incumbent providers lose the entire scope of work in competitive negotiations, so DXC will need to show its clients why it should keep their business and why they should not move to a multi-provider solution.

DXC’s recent acquisition of Luxoft should help it bolster its chances for renewals, especially when involving digital transformation. DXC executed this deal to gain access to digital talent that will help it catch up with its faster-moving peers who are fighting for a share of the emerging $40 billion digital services market. In its first quarter of fiscal 2020, DXC said it grew digital revenue by 35 percent and its digital sales pipeline increased 80 percent.

Salvino has the experience needed to deliver growth in large-scale services businesses. For DXC to grow, it will need to execute Salvino’s operational playbook quickly and accurately. In a tight labor market, the company will need to retain employees while appropriately supplementing with automation and artificial intelligence. DXC also will need to help its clients modernize IT to save costs and increase revenues while adjusting to smaller, more specialized deals.