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HP, BT team up in services deal

The two companies announce a $1.5 billion outsourcing agreement and a strategic alliance that will provide integrated information technology and communications services to customers.

NEW YORK--Hewlett-Packard and BT Group are pooling their strengths in a partnership that will target customers looking for integrated information technology and communications services.

The deal, which is valued at $1.5 billion over the next seven years, has two major components. First, the companies will provide outsourcing services for each other. Then they plan to use this experience to extend an integrated service offering to customers.

HP, the No. 2 computer maker in the world, and BT, a leading telecommunications provider, said that the agreement, announced Tuesday, builds upon each's core capabilities and provides a strong foundation for a longer-term alliance.

"We've taken the relationship to a new level of cooperation and collaboration," said Carly Fiorina, chief executive of HP, during a press conference here. "This deal reinforces HP's vision of making 'adaptive enterprise' a reality for customers that require seamless IT and communication infrastructure."

The deal is a reflection of how closely aligned information technology and communications systems are becoming within companies. As businesses increasingly rely on their Internet Protocol data networks to handle more business-critical applications, such as voice, the need for integration between the two types of services is becoming necessary, the companies said.

"This is recognition that IP networks have the security and reliability to deliver services end to end with the quality of service and reliability that they couldn't do a generation ago," said Ben Verwaayen, BT's chief executive officer.

Over the coming months, the companies plan to concentrate first on the outsourcing arrangements. BT will manage HP's corporate voice and data network and its product support call centers within Europe, the Middle East and Africa. HP in turn will take over the management of the telecommunications company's IT infrastructure, providing desktop support for 100,000 workers in BT's United Kingdom operations, as well as procuring and maintaining BT's computing hardware. The California-based company will also support BT's midrange servers internally and for BT hosting customers.

Approximately 330 employees will transfer between the two companies in the outsourcing arrangement, said Ann Livermore, executive vice president at HP.

Executives said the deal will provide great cost savings to both companies, but they would not provide specifics. The $1.5 billion revenue opportunity from the joint outsourcing will be split equally between the companies, according to executives.

Starting this summer, the companies plan to take the integrated solutions they have developed for each other and offer them to customers. Initially, they will target large enterprises, small and medium-size businesses, and consumers in Europe, but eventually they plan to expand offerings to other regions.

In the business market, the services will be focused on integrating IT and communications infrastructure, managing applications, providing mobility and servicing customer contact centers. In the consumer market, the companies will focus on education and entertainment services, a key focus for HP recently.