HP still in there with Rolls Royce despite losing its exclusivity in March

Back in March I reported about HP losing its big contract with Rolls Royce. This was a contract to provide all of its outsourcing needs, which was won by EDS 12 years ago.

Capgemini was named by Rolls Royce as its service integrator to manage its multi-sourced outsourcing environment. This was a blow to HP, which is attempting to boost its reputation as an IT service provider on the back of EDS’s good name.

It meant that a lot of HP contracts at Rolls Royce could be under threat.

But news today that HP has won a contract renewal from Rolls Royce to host its applications in its datacentres as well as manage the Rolls-Royce remote server and storage environments in Brazil, Canada, France, Germany and Norway, shows that all is not lost.

Robert Morgan, director at sourcing broker Burnt-Oak Partners said at the time of the Roll Royce deal with Capgemini that it did not mean that HP has lost everything but a case of HP  losing the moral high ground.

But he did say it could be the beginning of a gradual reduction in the amount of revenue HP gets from Rolls Royce. He expects perhaps a 30% reduction in HPs revenue with Rolls Royce quite quickly.

Changing datacentre provider would have been a big step. With a highly commoditised service such as this it is difficult to look further than the big players such as HP or Fujitsu. But in other areas, such as the cloud, HP might find it difficult to compete.

HP has not had the best of times with its EDS acquisition. It recently wrote down $8bn from its EDS business, which it acquired for $13.9bn.

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Rolls Royce and other outsourced companies all have the same issue. When they outsourced they effectively got rid of any employees that had a clue what I T was all about. They lost the management and the technical skills. For them to break free of the handcuffs the I T Outsourcer has them in, would be a very brave decision indeed. Infact, despite the fact that one day they might wake up and realize that they could have all the so called benefits of outsourcing much more cost effectively if they had competent I T staff of their own, they couldnt afford the cost of kicking out the existing supplier. I suspect that RR would have gotten all the benefits that they received from EDS HP if they had simply engaged them on a contract, they didnt have to jump so far into bed that they couldnt now get out if they wanted. Bad decision.