IT Outsourcing Industry to Advance With Increased Demand in Offshore Outsourcing. Banca y Finanzas:: Finances & Big Blue

IT Outsourcing Industry to Advance With Increased Demand in Offshore Outsourcing


Fecha Viernes, abril 11 @ 18:53:35
Tema Banca y Finanzas:: Finances & Big Blue


Hewlett-Packard has landed two big information technology outsourcing deals from Procter & Gamble and Ericsson. The move marks a big step forward for HP in its quest to expand its business services, and sticks it squarely into competition with firms such as Electronic Data Systems and IBM.
P&G decided back in November not to award a $7 billion contract to EDS, and said it would outsource its IT needs piecemeal. HP's $3 billion, 10-year agreement is the largest granted by P&G so far. Terms of the Ericsson contract weren't disclosed, but both deals are solid votes of confidence for HP's ability to effectively manage business networks and computing services.
HP's service revenues in its most recent quarter were $2.96 billion, out of total revenues of $17.88 billion. The segment's operating profits were $341 million, constituting a substantial chunk of HP's $879 million in operating income and representing operating margins of 11.5%. The margins for the services division, then, are more than double the 4.9% operating margins HP enjoys as a whole. Given this, it's easy to understand why HP would want to grow this part of its business.

Research suggests that more companies are moving towards outsourcing their information technology in an effort to save money and keep technology current. However, in the current weak spending environment, big outsourcing contracts have been hard to come by, and the traditional players in the field have suffered. That makes HP's win here even harder for companies such as EDS and IBM to swallow.


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