New service aims to ease enterprise headaches that can arise from work with multiple outsourcers. But HP isn't the only company planting a flag here.
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With more enterprises handing tech work to multiple outsourcers instead of awarding large, master contracts to a single provider, Hewlett-Packard has launched a service that aims to help CIOs more efficiently manage such complex engagements.
The company's Multi-Supplier Integration Service in essence helps enterprises establish a framework that specifies rules, policies, and standards to which individual vendors must conform when providing IT services, in order to create consistency across multi-supplier networks.
For instance, HP will help companies establish, implement, and administer global standards and procedures, such as ITIL and Six Sigma, for IT request rules, service catalogs, documentation, and program management. HP also will provide management technology that supports and automates such services aggregation.
"To pull this kind of network together takes a lot of engineering," which HP will provide under MSIS, said Peter Yates, director of Multi-Supplier Integration at HP, at a press briefing in New York City.
Yates said having a single outsourcer provide the bulk of IT services may be efficient to manage, but it also holds the potential for big trouble if the relationship sours. That's why many companies are moving to smaller deals with multiple providers. The value of so-called mega-deals involving contracts with a total value of more than $25 million fell 35% in the first half of 2011, compared to the previous year, according to market watcher TPI. "It's a quantitative shift in the agenda of the CIO," said Yates. "The traditional model carried big risk, and in a lot of cases those deals didn't work out very well."
But the single-supplier model also gave CIOs a single point of accountability when things went wrong. Yates said that under MSIS HP will not be held financially liable for other vendors' mistakes, even if it's coordinating those vendors' activities. "This is not a 'one throat to choke' model," said Yates. He conceded that that could make the offering less popular among IT execs who don't want to deal with a lot of finger pointing in the event of a foul up.
Yates said HP's EDS unit developed many of the standards and procedures it's applying to MSIS when it was part of multi-vendor teams that provided outsourced services to General Motors under the automaker's former CIO, Ralph Szygenda. Since then, HP has worked to make that framework repeatable and applicable to a broad range of enterprises in multiple industries. "It's been productized," he said.
Pricing will vary considerably depending on the size of the engagement and services utilized, but Yates said it's aimed primarily at Fortune 500-sized enterprises that spend millions of dollars on outsourced services. Ultimately, HP hopes to develop a more automated version of MSI aimed at mid-sized companies.
Establishing higher-margin services offerings is a priority for HP CEO Leo Apotheker. Earlier this year, he said he was not satisfied with the progress HP was making in moving beyond commodity services like equipment maintenance and support. He kicked veteran Enterprise group head Ann Livermore upstairs to a board position and removed her from day-to-day responsibilities, indicating he was no longer willing to wait for Livermore to move the needle on the company's services business, which saw year-over-year growth of just 1.5% in the most recent quarter. By contrast, IBM--HP's closest rival in the services business--saw its services business grow at 10% in the past quarter.
MSIS is among the new, high-margin offerings that are now "an absolutely a priority" for HP services, said Yates. But HP isn't alone in planting a flag in services integration, which is growing as more enterprises need to integrate internal IT resources with external sources like traditional outsourcers and providers of cloud-based platforms such as Salesforce.com and Amazon. IBM, Accenture, Capgemini, and others are pitching similar offerings. "A lot of the outsourcers stand willing and able to play this role," said Forrester analyst Bill Martorelli.
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