RealTime IT News

HP Acquisition Drives German Services Push

Hewlett-Packard has signed an agreement to purchase German IT services provider Triaton in a $430 million deal that could help HP secure bigger contracts with automakers and other manufacturing firms.

The computer and printer maker said German steel and engineering group ThyssenKrupp AG agreed to sell off its Triaton companies -- Triaton GmbH (Germany, which also has subsidiaries in Singapore, China and Brazil), Triaton France SAS (France), and Triaton N.A, Inc (USA) -- to HP for an estimated USD $430 million (370 million Euro).

The deal will have to go through the usual government approval processes. HP said it has also reinforced its strategic relationship with ThyssenKrupp as a "preferred IT services provider."

The Palo Alto, Calif.-based company says the acquisition helps bolster its presence in vertical industries, including the manufacturing sectors (steel/metals, chemicals/ pharmaceuticals/healthcare) and Germany's famed automotive marketplace.

"Primarily we did this transaction for a growing market in Germany as well as being centrally located to service Europe, Middle East and Africa," HP vice president of Managed Services Joe Hogan told internetnews.com.

"We have a strong practice in the telecommunications sector and we have our financial services portfolio. We're still maturing with this of course."

Of the major German auto manufacturers -- BMW, Mercedes, DaimlerChrysler -- Hogan said HP has some systems integration and outsourcing contracts, but would not consider itself in a position to corner any subset of the market.

"I don't consider any client in our back pocket," Hogan added. "You build a level of trust. You have to listen to the client and their needs first. That is not something you can take for granted."

Still, HP would love to take more business away from the likes of IBM , which has significant market share in Europe. The Triaton agreement could give HP a leg up into German markets as the company has been a seven-year partner with ThyssenKrupp. It has strong capabilities in SAP hosting services.

HP's Services division, which boasts 65,000 employees serving 168 countries has previously scored more than $1 billion in major new contracts in the last year and a half from clients such as Novell, Land Oilcakes, the U.S. Postal Service; and a $600 million contract with the Bank of Ireland.

For the last four fiscal quarters, HP said its revenue totaled $74.7 billion. The company said its annual IT services revenues in Western Europe alone hovers around the $5 billion range.

"HP has been very successful getting themselves to the table for these mega-deals, one has only to look at the P&G deal and the deal with the Bank of Ireland for evidence of that," Forrester Research vice president and Research Fellow Julie Giera told internetnews.com. "They are building a reputation for being able to capably manage the large, international data center."

Giera said much of the push comes from the top.

"CEO Carly Fiorina and Ann Livermore decided that HP Services should be competing for 'Mega-deals' -- those multi-hundred million dollar/billion dollar outsourcing deals," she said. "Up until this point, because HP did not have a robust applications practice and their infrastructure outsourcing practice was predominately managing HP equipment, HP was naturally excluded from many of the big deals."

Now HP's Services division competes heavily for IT services contracts against top-tier players like IBM, Electronic Data Systems and Sun Microsystems .

Over the past 18 months, HP has aggressively gone after mega-deals, improving its capabilities to manage any vendor's hardware. The company has also attempted to "move up the stack" with its product lines, Giera said.

The location aspect is important, she added, because companies focus on a "near shore" option, where computing is moved to a country close to the customer, but less expensive than a home country, as would be the case with Germany's central location.

"Expect more outsourcers to follow suit," Giera said. "Since the offshore firms do not have the capability to buy hardware and manage infrastructures, nor do they have the experience to hire and assimilate their customers personnel, this model -- while successful in the short term -- may exclude the offshore firms from doing business on a larger scale. Big companies outsource big and want service providers that can support that."