Tech Industry

HP nabs $244 million outsourcing deal

Hewlett-Packard plans to announce on Friday a $243.5 million, five-year deal to manage desktop computers for Rome-based Telecom Italia.

Hewlett-Packard on Friday will announce a $243.5 million, five-year contract to manage desktop computers for Telecom Italia, a contract that continues HP's momentum in information technology outsourcing agreements.

HP will handle desktop systems for the Rome-based telecommunications company's 90,000 users, with services such as help desk support and maintenance. About 600 Telecom Italia employees are scheduled to move to a new HP entity focused on desktop systems management. In addition, HP and Telecom Italia have agreed to join forces to host SAP business software systems for other companies in the future.

The deal "definitely expands our business in Italy" and in regions of Europe, the Middle East and Africa, said Joe Hogan, HP's vice president of marketing for worldwide managed services. "It's another large deal for us."

Telecom Italia expects the deal to cut its IT costs and allow it to focus on its core business.

The agreement will take effect after consultations with worker unions have been completed, and the Italian Antitrust Authority has given its blessing, HP said. Hogan said such hurdles are typically cleared within 120 days.

HP's outsourcing unit is making waves. In December, HP announced a five-year deal worth "hundreds of millions" of dollars to manage the technology behind DirecTV's billing operations. And last month, HP said it landed a contract to run automotive supplier Delphi's SAP business software in North America and Singapore.

Although it is smaller than rivals IBM and Electronic Data Systems in terms of overall services revenue, HP recently beat out these giants and other business technology outsourcing companies in a customer satisfaction study published by Information Week. HP placed first.

IT outsourcing--when a company farms out IT operations such as software development or data center management to another company--represents a bright spot in a dreary IT spending climate. As companies have focused on trimming costs, they've been willing to turn to IT outsourcers. IBM and EDS also have announced significant IT outsourcing contracts in the past few months.

HP's managed services unit grew 14 percent, year over year, in the October quarter. Overall, HP's services division--which also includes customer support and consulting and integration units--saw its revenue fall 3 percent, year over year, to $3.1 billion.

HP Services accounted for 17 percent of the company's $18 billion in revenue in the October quarter.

More and more IT outsourcing work may be done at low-cost facilities overseas, as U.S. IT services companies increase offshore operations to compete with Indian IT services providers. Market research firm Giga Information Group predicts that IT outsourcing to India alone will grow by 25 percent this year.