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By Paula Musich  |  Posted 2003-04-28 Print this article Print

Still, what HP lacks in experience and breadth of professional services, it seems to be making up for in aggressiveness. "HP is still a relatively new player in the game—small and hungry. They have 800 outsourcing customers. Thats a tenth of what IBM and EDS have. They want to make a splash in the market, which could lead P&G and others to think theyll have more influence over HP as a result—because they need to create a good track record. Thats value that customers like P&G can exploit," said Dean McMann, CEO at The Ransford Group, in Houston.

HP Services size can be misleading. Although it became a $15 billion services organization with the Compaq Computer Corp. merger—putting it at the No. 3 spot for total IT services—it is a distant seventh in the IT management outsourcing segment behind IBM, EDS, Computer Sciences Corp., Fujitsu Ltd., Siemens AG and Deutsche Telekom AGs T-Systems, according to Bruce Caldwell, an analyst for Gartner Inc., in Stamford, Conn.

So, how did HP Services—not even a dark horse in the running last year—come to win the P&G deal, when EDS last summer was the sole contender for the contract? Some industry watchers say they think HP Services won the deal by being the lowest bidder. But HP and P&G officials countered that. "All of these deals are profitable in the first year," said Juergen Rottler, senior vice president of marketing strategy and alliances for HP Services, in Palo Alto, Calif. Rottler said HP Services also agreed to give significant architecture control to P&G.

P&G officials attributed the award to price, service levels and a similarity in culture. "HP had a very solid financial proposal. We felt good about the level of services. We also felt HP would be a good place for our IT employees," said Damon Jones, P&G spokesman, in Cincinnati.

"When we started the process two years ago, the [business process outsourcing] industry was growing much faster than it was last fall. So many market dynamics made things keep changing. We felt it was a less risky proposition to go slower and rely on multiple partners," said Jones, who conceded that EDS troubles were a factor in splitting the contract up.

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