HP's $1B data center investment sets stage for growth

Hewlett-Packard Co. will spend $1 billion to automate data centers and other company functions of its Enterprise Services business, a move that will affect some 9,000 employees between now and 2013.

“Over the past 20 months, we focused on integrating [HP’s acquisition of] EDS and improving profitability,” said Tom Iannotti, senior vice president and general manager of HP Enterprise Services, in a company statement posted on its Web site June 1. “Now that the integration is largely complete, we have identified significant opportunities to grow and scale the business."

HP will consolidate its Enterprise Services’ commercial data centers, management platforms, networks, tools and applications to create a more scalable, modernized and automated information technology infrastructure to improve client services, the statement said.

HP said it will invest in fully automated, standardized, state-of-the-art commercial data centers built on its converged infrastructure and operated by its own management software.

“As a result of productivity gains and automation, HP expects to eliminate roughly 9,000 positions over a multiyear period to reinvest for further growth and to increase shareholder value,” it added.

HP, which has about 300,000 employees worldwide, also expects to hire or rehire about 6,000 employees in sales and delivery services.

In terms of net employee losses, “it’s a relatively small number,” Ann Livermore, executive vice president at HP, told analysts during an early morning conference call today.

She added that the personnel action should be viewed in the context that it will occur over several years and that the average yearly attrition rate for services businesses is usually in the high single digits.

“No final decisions have been made regarding where those layoffs will come from and where the hiring will take place as far as geographical [areas] and that would include our government sector,” a company spokeswoman told Washington Technology.

She added that she had no information as to when those decisions would be made.

The computer-maker said it will take the $1 billion charge over several years and it anticipates that the restructuring will generate the same amount in annual savings, or $500 million to $700 million in net savings, after reinvestment.

Hewlett-Packard Co. ranks No. 12 on Washington Technology’s 2010 Top 100 list of the largest federal government prime contractors.