HP Makes a Splash with $3B P&G Contract

Hewlett-Packard has beat out its IT services rivals to win a major outsourcing contract with consumer goods maker Procter & Gamble worth $3 billion over the life of the 10-year managed services pact.

The P&G contract news came on the heels of an IT services contract that Swedish mobile device maker Ericsson awarded HP. Although the financial terms with Ericsson were not released, analysts have reportedly noted that the pact’s value is substantial.

Both contracts help the Palo Alto, Calif.-based HP further position its plans to compete more aggressively for outsourcing projects alongside top IT services vendors such as IBM , CSC and EDS .

From 1997 to 2001, IBM, CSC and EDS won 53 percent of the top 100 outsourcing deals, according to research firm IDC. Since closing its merger with Compaq, HP has signaled it wants a bigger piece of the IT services pie.

The P&G contract calls for HP Services to manage the company’s IT infrastructure, data center operations, desktop and end-user support, network management and some applications development and maintenance support for P&G’s global operations in 160 countries.

About 1,850 P&G employees (most of them from P&G’s global business services unit from 50 countries) will move over to HP Services as part of the contract.

P&G said its business services division selected HP for the contract after a comprehensive and competitive process that included major IT services providers. The company did not specify which vendors were in the final round, but EDS had been widely reported months ago as in the running before dropping out.

Under the agreement with Ericsson, HP will provide IT services for Ericsson’s operations worldwide as part of Ericsson’s plans to cut its IT costs while it copes with a slowdown in demand for telecommunications and wireless products worldwide.

As is customary with outsourcing contracts, personnel in Ericsson’s global IT services (EGIS) division will transfer to HP’s services group.

HP and P&G said they expect to finalize the deal by May. The Ericsson contract is expected to be finalized by the end of the second quarter.

Both contracts cap a string of recent IT services wins for wins for HP. In February, the company won a five-year outsourcing pact worth $244 million with Telecom Italia (final approval from the Italian Antitrust Authority is still pending).

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