Can HP sustain $3,000 a head outsource rate?

Hewlett-Packard's $3bn (£2bn) deal with consumer goods multinational Procter & Gamble looks set to lower the cost of global...

Hewlett-Packard's $3bn (£2bn) deal with consumer goods multinational Procter & Gamble looks set to lower the cost of global outsourcing. But commentators have questioned whether HP can sustain this value.

In a move that promises to shake up the global outsourcing market, previously occupied by just IBM Global Services and EDS, HP promises to cut IT costs at P&G to about $3,000 per employee, significantly below the industry average.

In recent global outsourcing deals in the banking sector IBM set a price of $3,200 per employee and EDS $3,400 per employee.

Industry experts doubt whether HP can sustain the value it has offered P&G.

James Snowdon said, unlike IBM "HP does not have the credibility on the business process outsourcing front. IBM is still the only company to offer end-to-end business process transformation."

But, he said, "If your reason for outsourcing is to acquire good technology, HP should be on your shortlist."

Large businesses and the public sector are now under pressure to reduce costs by outsourcing their IT infrastructure to a single supplier.

According to the UK IT Expenditure Trends & Forecast survey from Kew Associates in association with Computer Weekly, UK IT directors are expected to spend £1.36bn on outsourcing in 2004, an increase of 16.3% on 2003.

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