P&G Aiming for Automatic Pilot with HP Outsourcing

'Now we have to make the marriage work,' a Procter & Gamble official says of the company's $3 billion outsourcing deal with Hewlett-Packard.

LAS VEGAS—A year after embarking on a $3 billion, 10-year outsourcing deal with Hewlett-Packard, Procter & Gamble is reporting steady progress, although much work has yet to be done.

"The honeymoon is over, and now we have to make the marriage work," Linda Clement-Holmes, director of infrastructure services at Procter & Gamble Co., said during a presentation at Gartner Inc.s Outsourcing Summit here. "We want to be on automatic pilot," she said, adding it will take another 18 months to get there.

Although the deal was signed in April 2003, work did not begin under the contract until August 2003. Under the deal, Hewlett-Packard Co. took over about 2,000 P&G IT employees.

Shifting them to HP went smoothly, Clement-Holmes said. "There were no problems in the transition."

Under the agreement, HP took over support of all desktop systems, data centers, servers, application support and maintenance. P&G, with headquarters in Cincinnati, has 98,000 employees in 80 countries. The company has IT operations centers in 53 countries.

"Were beginning to transform their infrastructure and how work is done," Joe Hogan, vice president of marketing for worldwide managed services at HP, said in an interview before the conference. "Were to the point where weve identified the processes to do automated measurement and a more utilitylike approach."

"In change management, HP had better processes than we did," Clement-Holmes said, adding that P&G is using a scorecard to measure HP performance. "HP does do pretty good at meeting our service levels."

The HP deal was the first of three major outsourcing agreements P&G has signed in the past year. In November 2003, the company handed over its human resources information processing to IBM.

/zimages/3/28571.gifClick here to read about an outsourcing pact between HP and Nokia Corp.

In April 2004, P&G signed another deal with HP, this time for business process outsourcing.

"They [P&G] felt comfortable around our finance and administration intellectual property," Hogan said. "They felt we could bring to them synergy around accounts payable because we also support the applications."

The piecemeal approach follows an attempt by the company two years ago to outsource all IT resources to Electronic Data Systems. That deal fell through, however.

/zimages/3/28571.gifOffshoring is good for business but bad for America, eWEEK columnist David Coursey writes. Click here to read more.

Clement-Holmes said the HP experience has brought some lessons so far. Despite a 10,000-page contract, leaving room for flexibility is essential, she said.

"You cant anticipate everything you need to know," she said. "Its both a relationship and a contract. You cannot communicate enough." So far, she added, "The fundamentals of the relationship are very strong."

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