Hewlett-Packard officials say the company will invest $1 billion in its data centers to improve the delivery of services to customers. The move, which will include instituting greater automation within the IT facilities, will lead to 9,000 data center jobs being eliminated. However, HP says it will hire another 6,000 workers in other areas such as sales.
Hewlett-Packard officials are planning to pump $1 billion into the company's
Enterprise Services business, a move intended to increase the amount of
automation in its data centers and one that will result in 9,000 jobs being
HP officials said June 1 that they expect the move to help the
company gain ground in a highly competitive space, save $500 million to $700
million and cut in half the number of data centers used by HP customers.
HP's stated goal is to increase the number of automated
services offered to customers, which will mean the need for fewer people inside
the data centers themselves.
It's the best way to remain competitive in a industry dominated
and in which other industry giants such as Dell and Xerox are making
a push, according to Ann Livermore, executive vice president of HP's Enterprise
"We have an opportunity to further accelerate our
competitive advantage," Livermore
said in a conference call with reporters and analysts June 1. "We think
the next 10 years are going to be about who can automate the delivery of
HP augmented its Enterprise Services business in May 2008 when
for $13.9 billion. Since that time, HP has worked to integrate the
massive services company into its business, including by slashing jobs.
Officials said this latest move is the second step in this
integration effort. HP can combine data centers and IT networks, and in the
process modernize and automate the IT processes within the facilities.
HP already has experience in consolidating data centers. Four
years ago, the company announced an ambitious plan to whittle down the number
of its global data centers from 85 to six. The experience gained from that
effort is showing itself in the current plan, according to Forrester Research
analyst John McCarthy.
"HP is applying the lessons learned from their own data
center rationalization process to EDS and
its customers," McCarthy said in a statement. "In the long term, this
is indicative of the market's movement away from custom offerings in the light
of 'as-a-service' pricing and deflation."
Frank Gillett, another Forrester analyst, agreed, but said
there will be some differences. In HP's consolidation project four years ago,
the company put everything into six U.S.-based data centers. Now the data
centers that remain after this current project will be based all over the
Louis Miscioscia, an analyst with equity research company
Collins Stewart, said in a report HP's moves made sense, particularly
considering the competition from IBM and
others, and EDS' lack of investment in
automation technology in its data centers before the HP acquisition.
"Going back to when HP acquired EDS
in 2008, we had been very supportive of the tactical and strategic importance
of this move from day one," Miscioscia wrote in the report.
HP, which has about 300,000 employees worldwide, will lose
9,000 data center positions over the next few years, but will hire another
6,000 people in such areas as sales for the Enterprise Services business.
Forrester's Gillett said for the most part HP hasn't done a lot
of streamlining since buying EDS, so an
initiative such as this is not surprising.
"If you do the job right, you are taking people out of the
data center because you are automating and standardizing functions in the data
center," Gillett said. "The 6,000 jobs they're bringing in are on the
front-end sales end of things."
What HP is going to have to do in the future, he said, is start
filling in the details of the data center plans, such as where the facilities
will be located, what incentives customers will have to go along with any
changes and what jobs will be lost.
Services revenues for HP hit $8.7 billion in the company's
fiscal second quarter, a 2 percent increase over the same period in 2009.
However, those revenues didn't climb nearly as fast as those in
other parts of the business, such as Enterprise Storage and Servers, which saw
a 31 percent jump, or Personal Systems Group, which had a 20 percent increase.
Still, services remains an attractive place for vendors wanting
to attract customers that are looking for a single place for hardware and
software purchases in a cloud computing world.
A year after HP's acquisition of EDS,
bought Perot Systems
for $3.9 billion to add to its services capabilities.
Xerox jumped into the fray in September of 2009, when it bought
Affiliated Computer Services
for $6.4 billion.