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Inside HP's new US$1 billion outsourcing plan

Stephanie Overby | Nov. 11, 2010 spoke to Rasmussen and Jeff Womack, VP, Best Shore enablement, about HP's increased focus on cost cutting and offshore delivery, its pursuit of domestic business in emerging markets, and the criticism that HP doesn't adequately value the IT services business.

Rasmussen: In the early days [of outsourcing], clients chased the lowest cost location and many found themselves flying to four or five different countries [to manage their portfolio of providers]. Now they can have the same pair of hands managing their IT at a competitive cost. GM, for example, may prefer to have their North American work in India because they've had it done that way for many years. But as the business expands to China, they would want some services delivered there. There are all kinds of reasons why clients would want a single or double location. A lot of them want "India-plus-one." Historically they've had a presence in India, but to mitigate risk they'd like to have some assets somewhere else.

You announced 9,000 jobs cuts as part of this outsourcing business restructuring.. How will those lay-offs be dispersed by geography and job function?

Rasmussen: I can only reiterate what [HP announced in June] that there would be 9,000 positions eliminated over two years, and 6.000 would be brought on board. While we didn't provide any specificity at the time, many of those 6,000 [new hires] are in sales and delivery, and when looking at delivery, would be mid-career professionals with four or five years of experience as opposed to recent college graduates. That's as much granularity as I can provide.

But you can't you provide that level of detail about the positions you're eliminating?

Rasmussen: No.

Given the current economic environment and unemployment in the U.S., how do you address the criticism that you should be hiring more American workers rather than investing in employees overseas.

Rasmussen: When you take a look at some of the domestic business we do here, a tremendous amount of that work is with the federal government. We've established local centers here that provide that work because it cannot be offshored. We have to look at the right cities to provide tax benefits to do that work. The same is true in other countries. Some of our delivery centers in New Zealand were created to provide services to [government agencies].

We balance that the best we can and we do provide tens of thousands of jobs onshore. But our clients want a cost-optimized solution.

More than 60 percent of HP's total revenue originates outside the U.S. Is that a higher growth area for IT and business process services than Western markets?

Womack: That's one of the key dimensions that's driving some of our model change and investmentthe globalization of our client base. We had a client in Japan that was intrigued with our center in the Philippines because they are expanding into North Asia and that gives them gives them a good footprint. The breadth of this model was very appealing for that client.


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