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HP, BT in $1.5B On-Demand Alliance
By Erin Joyce

May 4, 2004

NEW YORK — UK-based telecommunications giant BT and systems provider HP (Quote) have hired each other for outsourcing services valued at about $1.5 billion over seven years.

The companies will also join forces to offer a soup-to-nuts IT outsourcing menu to enterprises in the UK, Middle East and Africa. The alliance is the latest aimed at providing utility-style computing services to corporate and government customers.

HP’s utility-like systems offerings fall under its “adaptive enterprise strategy” of providing customers systems “by the drink.” Other systems vendors use the term “on-demand computing.” Whatever the jargon, tech vendors are increasingly offering outsourced IT services to manage infrastructure throughout the lifecycle of the assets.

“Companies we serve collectively face unrelenting pressure to do more with less,” HP CEO Carly Fiorina said at a news conference here. “To compete effectively, they need to master change, and use change to their competitive advantage. That is the essence of HP’s adaptive enterprise set of solutions.”

Under the mutual outsourcing deal, HP will manage BT’s mid-range and desktop information IT infrastructure in the UK, while BT will oversee HP’s voice and data network and product support call centers in Europe, the Middle East and Africa.

As is usually the case with such arrangements, the companies will swap about 330 employees. Some 290 will be transferred to HP and 40 will move to BT. The immediate focus, officials added, is to implement managed service agreements over the coming months.

Ben Verwaayen, BT’s CEO, called the deal a great opportunity that delivers key components of the company’s information and communications technology (ICT) strategy.

“In a consolidating industry, we believe it makes sense to create a strong alliance between a world-class communications company and a global IT company,” Verwaayen said. “This is based on philosophy of go-to-market, where complementary skills of the two organizations fit very, very nicely.”

The IT outsourcing offerings should begin July 1st, and, for its first phase, will initially target European enterprises, the mid-market in the UK, as well as consumer and small and medium size businesses (SMBs).

The deal with BT comes about a year after HP moved to unite its billion-dollar HP Services and HP Enterprise Systems Group (ESG) into a new HP Technology Solutions Group (TSG).

Ann Livermore, who heads HP’s Technology Solutions Group, said the BT deal was just one aspect of that consolidation within HP.

Businesses really want this seamless integration with their IT infrastructure these days, Livermore said. Customers want provisioning end-to-end, where they can look at the quality of service across the network. “This combination can bring compelling value,” she said.

Livermore said both companies will enjoy cost benefits, as HP manages internal desktop services for BT, as well as help desk support for about 100,000 employees across the company. That includes full lifecycle management of desktop systems, along with procuring new computers as well as support for the computer systems and the applications running on them.

In addition, she said HP would be managing mid-range data centers for BT as well as customers, both internally and externally for customers, including multi-vendor environments.

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