HP Beefs Up The Capabilities Of Big Outsourcing Business
SOURCE: CNN Money
DATE: March 14th, 2008
ARTICLE
Hewlett-Packard is building two new data centers for what it sees as the next chapter in outsourcing.
The tech giant plans to announce Monday new offerings that will let companies easily add new software and hardware capabilities directly from HP’s (NYSE:HPQ)
To handle the new demands, the company is building data centers, including one in Europe near completion and another in Asia later this year. It’s also using parts of two new data centers in the U.S. that handle HP’s internal technology systems.
HP’s outsourcing services typically have involved HP taking over the customers’ data centers, but now customers can use HP’s centers.
“Clients no longer have to build out infrastructure,” said Pat Adamiak, vice president of marketing for HP outsourcing services. “They can actually save a lot of time and money.”
Adamiak says this is the biggest step in the evolution of outsourcing since the megadeals earlier this decade that saw companies shift entire tech departments over to HP and other outsourcers.
Bringing the operation into HP’s center gives customers more flexibility and quicker access to cutting-edge software and computing equipment, HP executives say. This should fuel growth in HP’s outsourcing business, Adamiak says.
“This gives us a powerful lever in the future,” he said.
Unit’s Growth Outpaces Parent
Companies around the world have increasingly used outsourcing to slash their spending on technology and business tasks. Outsourcing is a big part of HP’s services unit, which accounts for 15% of total HP revenue. In the quarter ended Jan. 31, HP said outsourcing services sales rose 15% from the year-earlier quarter, while overall services revenue rose 11%. Outsourcing also beat the company’s overall sales growth of 13%.
Adamiak says the new data centers use the latest in servers, storage, networking and software. He wouldn’t say what the new program is costing HP to start and run.
“(Customers) can get best-in-class infrastructure without having to custom-design it themselves,” Adamiak said.
Services offered include extra computing power for big-time software jobs, such as geothermal analysis or animation clips for movies. The service gives customers access to such software as Microsoft’s (NASDAQ:MSFT)
For example, if an HP customer wants to upgrade its European operations’ business software offerings, the customer can simply make that a part of a monthly bill under a three- to five-year contract. That means a customer doesn’t have to spend millions of dollars on a new data center to power the software — or put up with time delays.
“What we provide is much faster and more adaptive,” Adamiak said.
HP says its customers can now upgrade without a multimillion-dollar hit to their balance sheet. Companies can just make the new service part of its monthly expenses instead of taking a big one-time cost.
Highly Competitive Market
John Madden, an analyst at research firm Ovum, says HP can use the new tools to offer customers more choices in the competitive market. HP’s outsourcing rivals include IBM (NYSE:IBM)
“There are a lot of vendors (pursuing) a limited amount of customers’ attention,” he said.
Madden says he couldn’t predict how much this outsourcing service might save potential customers, but adds that the savings could be real. He says HP has a reputation for taking costs out of its technology.
The adaptive-infrastructure-as-a-service offering is, to a degree, part of a trend known as “cloud computing.” It entails letting customers access software and hardware remotely, any time and anyplace.
But Adamiak says cloud computing is typically more focused on small and midsize businesses. HP is targeting larger corporations in need of more beefy and complex technology systems and software.
Adamiak sees the new service as the third wave in tech outsourcing. He says the initial trend in the 1990s was to outsource pieces of the tech department, such as handling the service-desk inquiries. The second began earlier this decade and involved outsourcers taking over entire tech departments. HP’s big outsourcing contract with Procter & Gamble (NYSE:PG)
“This is kind of the start to chapter three,” he said. “It really is a better way to try to do chapter two.”
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