14 April 2003 Hewlett-Packard has won a $3 billion, ten year outsourcing contract with Procter &Gamble (P&G) covering virtually all of the consumer goods company’s IT operations.
HP Services will manage P&G’s IT infrastructure, data centre operations, desktop and end-user support, network management and some applications development and maintenance support for P&G’s global operations in 160 countries.
The outsourcing contract with HP is a more straightforward affair compared to the deal that P&G tried to conclude last year.
Then, P&G was looking not just to outsource its IT functions, but virtually all of its back office operations in a complex, $8 billion deal that both short listed vendors ultimately baulked at on the grounds of the risks involved.
First, EDS withdrew partly because, it was claimed, that it was already overexposed in some potentially troublesome outsourcing deals, not least with telecoms giant WorldCom, which had gone into Chapter 11 bankruptcy protection.
P&G was then spurned by the runner-up in that contest, Affiliated Computer Services (ACS). It claimed that the risks that P&G was asking it to take were far too great, despite the fact that the deal would have put ACS on the map in a market controlled by only a handful of vendors.
“While the size of this opportunity was historic and would have been accretive to earnings, we believe the financial, operational, and cultural risks were too high. As a result, we decided to withdraw from this opportunity,” said Jeff Rich, CEO of ACS.
EDS had also entered the contest for the re-tendered P&G deal and HP’s win represents something of a landmark in its bid to move more firmly into the services sector. “This is a huge accomplishment for us and establishes HP as a recognised alternative to IBM,” Ann Livermore, head of HP Services, told the Financial Times.