Hitachi to outsource in North America

The Japanese computing giant's consulting division steps into North America with the launch of a new outsourcing business unit.

Matt Hines Staff Writer, CNET News.com
Matt Hines
covers business software, with a particular focus on enterprise applications.
Matt Hines
3 min read
Hitachi's consulting division stepped into the North American market Monday with the launch of a new outsourcing business unit.

The consulting arm of Japanese computing giant Hitachi reported that its Outsourcing Business Unit, headquartered in Dallas, would focus on three specific areas of the North American market: business process outsourcing (BPO), extended application outsourcing and sourcing optimization/compliance. Hitachi executives announced earlier this year that outsourcing would become one of the company's primary growth areas.

"In North America, we are going to leverage a very large, shared services environment that Hitachi created to support its various divisions and subsidiaries," Larry R. DeBoever, executive vice president at Hitachi, said in a statement.

"Currently, the shared services environment supports 15 separate Hitachi entities that have chosen shared services over running their own IT (information technology) or outsourcing to a third party," he added.

DeBoever will lead the new business unit, Hitachi said.

Momentum behind the North American outsourcing market continues to build, as companies ink deals with high-profile consulting companies such as Electronic Data Systems, Hewlett-Packard and IBM to manage IT infrastructure and strategy. Thus far, Hitachi Consulting has built a name for itself primarily in the Japanese market, where the company estimates that it has signed on 500 outsourcing customers, including a $2 billion deal with UFJ Bank, one of the country's largest banks.

Hitachi executives indicated that the company would target midsize outsourcing deals that fail to attract attention from enterprise market leaders such as IBM.

"We believe there is an enormous market opportunity for us by simply addressing the gap between the very large outsourcers that want big transactions and ownership of everything, and the small outsourcers that usually do one or two things very well," DeBoever said.

Hitachi reported that its North American outsourcing business would go after specific vertical markets in the BPO sector such as procurement, finance and accounting, human resources and customer relationship management (CRM).

In the applications outsourcing market, the company will target commercial and custom-developed applications such as infrastructure management software. In the sourcing and compliance arena, Hitachi said it would pursue vendor relationship management and procurement business.

Hitachi's decision to go after the high end of the IT outsourcing midmarket is a good strategy for building a reputation in North America while avoiding direct competition with industry leaders such as Computer Sciences, according analysts. Allie Young, an analyst with Stamford, Conn.-based Gartner, said it will be tough for Hitachi to compete with more-established players, but she said taking aim at second-tier deals might pay off in the long run.

"It will take time for Hitachi to figure out the North American market, just as it would take time for an American company going into Japan," said Young. "Their biggest challenge will be finding a way to differentiate. That's important in the current market, and it's not yet clear how they might do so."

Young said Hitachi does have some other factors in its favor, coming into North America. The company's ability to market to its existing customers, and skills it acquired as a result of its hiring of over 300 former employees of Arthur Andersen, will help Hitachi garner outsourcing business, Young said.