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Hewlett-Packard Co.s services unit last week announced its largest IT outsourcing contract ever in a $1.5 billion deal with Canadian Imperial Bank of Commerce.
The Palo Alto, Calif., company separately bought out CIBCs half interest in its Intria-HP joint IT services venture with CIBC subsidiary Intria Corp.
In the seven-year contract with CIBC, HP will provide services ranging from desktops to mission-critical applications—including outsourcing of IBM MVS mainframes and AS/400 minicomputers, as well as Sun Microsystems Inc. servers, according to HP officials. The comprehensive deal calls for HP Services to handle related technology procurement, asset management and IT vendor management.
The deal signals HP Services intent to expand its multiservices capabilities beyond HP and Intel Corp. platforms.
“As a top-tier services company, [we must] address whatever [equipment customers] have in their environments,” said Ann Livermore, executive vice president of HP Services, during a press conference announcing the deal. “There is always a variety of technologies in large contracts. These help us expand our skills.”
In challenging top-tier outsourcing companies such as IBM Global Services and Electronic Data Systems Corp., HP Services will pursue a number of growth strategies, Livermore said. “You will see us continue to aggressively grow our services business. Well do a lot of things—large deals, aggressive hiring—and youll see us consider other specific acquisitions or joint ventures,” Livermore said.
CIBC, a Toronto-based financial services company, formed the Intria-HP joint venture with HP four years ago. In its strategy to focus on its core banking business, the bank chose to strike an outsourcing deal with HP without going to the market for competitive bids.
“The four years let us trust HP to deliver basic infrastructure services,” said Mike Woeller, CIO at CIBC. “We considered the full range of options, from insourcing to a full-fledged [request for proposal]. We accelerated our process by over a year by not having to go to the marketplace.”
Woeller said CIBC evaluated the deal with the help of external benchmarking companies.
“[HP Services] needs some very large deals to establish credibility for being able to manage large, complex environments and to do it on a very mission-critical and availability-critical basis,” said Andy Efstathiou, an analyst at The Yankee Group, in Boston. The CIBC deal goes directly to that requirement, Efstathiou said.
As part of its outsourcing contract, HP will acquire 1,280 IT professionals, a number of technology assets and two data center sites.
HP and CIBC officials would not disclose the value of the Intria buyout.