HP lines up outsourcing deals
Hewlett-Packard says it is on the verge of scoring major information-technology outsourcing agreements with Procter & Gamble and Ericsson.
The company said it plans to manage Procter & Gamble's IT infrastructure, including data centers, desktop and end-user support, and maintenance support for the consumer products giant's operations in 160 countries. The agreement still needs to be made final, but the companies said it will be worth $3 billion within the next 10 years. The companies expect to reach a definitive agreement in May.
HP also said Friday that it has signed a memorandum of understanding with Ericsson to provide IT services for the cellular equipment maker's global operations. At this time, the memorandum establishes the principles of how the two companies intend to work together. No financial terms were disclosed for the deal, but the final agreement is expected to be signed before the end of the second quarter.
IT outsourcing deals have been bright spots in an otherwise listless technology sector. Outsourcing involves businesses contracting with IT companies that assume management of application development or tech support. Market researcher Gartner has predicted that the IT outsourcing marketing in North America alone will rise from $101 billion in 2000 to about $160 billion in 2005. Gartner has also warned that half of IT outsourcing projects will be considered unsuccessful in 2003 because they will not deliver the expected value.
HP competes in this field with companies such as IBM, Electronic Data Systems (EDS), Computer Sciences and Accenture. HP's outsourcing unit in recent months has landed big deals with Telecom Italia, satellite television provider DirecTV and automotive supplier Delphi.
HP services chief Ann Livermore said the company beat out rivals IBM and EDS for the Procter & Gamble deal. Livermore said her unit won over Procter & Gamble for reasons including confidence that HP would be a good employer for some 1,850 Procter & Gamble employees moving to HP and also for the quality of HP's services. An InformationWeek study of 700 business technology professionals published in November found that HP ranked first in customer satisfaction among business technology outsourcers, scoring higher than IBM, EDS and Accenture.
Procter & Gamble is "really placing a 10-year bet that HP's going to be the leader in the industry," Livermore said.
In both the Procter & Gamble and Ericsson deals, HP is winning business that it didn't previously have. An HP spokeswoman said HP has provided services to Ericsson in the past, but the memorandum of understanding relates to a different set of IT tasks.