May 6, 2003 7:29 AM PDT

HP seals P&G outsourcing deal

Hewlett-Packard announced Tuesday that it has finalized a deal worth $3 billion over 10 years to manage Procter & Gamble's overall IT infrastructure.

The agreement calls for HP's services unit to run the consumer product maker's data centers and information technology infrastructure, to provide desktop and end-user support, and to oversee network management. Under the agreement, HP will also develop and maintain applications for Procter & Gamble's global operations in about 160 countries. HP announced last month that it was close to reaching a final deal with Procter & Gamble.

HP touted the deal as an example of its new Adaptive Enterprise strategy--or the ability to put various HP technologies to work amid a customer's shifting requirements for computing and network power. IBM has a similar strategy it calls on-demand computing.

The Adaptive Enterprise strategy, announced separately on Tuesday, covers a new set of products and services that HP asserts will help companies tailor computer and network systems to provide more flexibility. HP said it will collaborate with technology companies such as BEA Systems, Cisco Systems, Oracle and SAP, as well as consulting firms such as Accenture and BearingPoint, to provide IT services that can be quickly adapted to changing business needs.

In conjunction with the Adaptive Enterprise launch, HP announced services agreements with two major telecommunications companies.

In a deal worth $45 million, HP will redesign Alcatel's printing and copying configuration, replacing printers and copiers throughout Europe. The agreement also calls on HP to provide managed printing services intended to give Alcatel more a flexible and efficient setup. The service harnesses HP's multifunction printers, which offer scanning, faxing, copying and the ability to transfer e-mail files.

HP also expanded its ongoing relationship with Sprint, announcing that it has integrated the Zero Latency Enterprise architecture--designed to provide provide fraud detection and cost savings--into Sprint's IT backbone.

In Procter & Gamble's case, HP said it will use its Utility Data Center and Adaptive Network Architecture to manage the IT infrastructure, providing different levels of power and flexibility depending on the company?s needs.

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.

However, 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, 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.

 

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