HP To Cut Customer-Related Data Centers By Half, Streamline Operations

Vendor will drop 9,000 jobs, invest $1B in enterprise business.

Hewlett-Packard Co. said this week that it will pare by half its 100 data centers running customers’ IT operations, drop some 9,000 jobs and pour about $1 billion into its enterprise services business as part of a multi-year plan to streamline operations and shore up its competitive position in the services market.

“We plan to consolidate enterprise services data centers, management platforms, networks, tools and applications to create a more scalable, modernized and automated IT infrastructure that will better serve our clients' needs,” said Ann Livermore, HP executive vice president, Enterprise Business.

“And, in services the highest automation enables the highest quality,” she said.

The consolidation of the vendor’s commercial data centers follows a similar—albeit more ambitious--effort HP undertook four years ago to downsize its internal legacy data centers worldwide from 85 to six in three locations.

However, officials said that HP will not follow a comparable blueprint with this latest volley.

“Now when we say commercial data centers, that means the data centers that are running our customer IT operations for them when we have services contracts with them,” Livermore said.

“You won't ever see the same order of magnitude [of consolidation] as we're able to do inside HP because in some instances with our clients we have data centers that are dedicated to them that they want dedicated to them,” she said.

“We have certain clients who have geographic requirements for us for where they want data centers.”

Livermore said that the vendor will direct financial resources to further develop its businesses in private cloud infrastructures, application services and desktop-as-a-service, hiring upwards of 6,000 new employees to fill new jobs in sales and delivery.

“HP will invest $1 billion and use [our] strong portfolios to transform Enterprise Services,” said Livermore. “We will invest in standardized, fully automated commercial data centers,” she said.

Livermore said that HP will apply its Converged Infrastructure architecture—a well-publicized plan to address IT sprawl through open, industry standard solutions readily integrated and deployed—and operate the next generation data centers with its own management software.

HP said it will take a $1 billion pre-tax restructuring charge over a number of years, about half of which will be accounted for in its fiscal third quarter 2010 and the remainder by the end of its fiscal year 2013.

The vendor said it expects the layoffs and restructuring charge to culminate in savings of at least $500 million and perhaps as much as $700 million by year end 2013.

Modernizing data centers will help customers

HP believes that modernizing its commercial data centers will improve the ability of its clients to more efficiently run their own business, taking advantage of new offerings and stepped-up service delivery.

“Leveraging our experience from HP's own IT transformation, we will help our clients modernize and migrate their applications to these Next Generation infrastructure platforms,” Livermore said. “This will allow them to run their IT operations faster and more efficiently.”

HP offered that the backdrop for its latest round of operational and technological consolidation stemmed, in part, from its staged integration of Electronic Data Systems, the services giant it acquired in 2008 for $13.9 billion and shortly thereafter furloughed some 25,000 EDS employees.

The company said that since 2008, it has integrated 100,000 EDS employees, closed 200 sites, retired 400 applications and signed 25,000 services deal, 50 of which were for contracts exceeding $100 million.

“Over the past 20 months, we focused on integrating EDS and improving profitability,” said Tom Iannotti, HP senior vice president and general manager, Enterprise Services.

“Now that the integration is largely complete, we have identified significant opportunities to grow and scale the business. These next-generation services will enable our clients to benefit from the combined technology and services leadership that only HP offers.”

TAGS: services,HP,Enterprise,EDS,data centers



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