I sat down recently with Randy Mott, CIO of Hewlett-Packard, at a meeting of technology managers in Austin, Texas. HP sponsored the tech-exec confab to talk about its radical IT transformation project, which is both a cost-cutting move and an ongoing advertisement for HP's business technology savvy. Launched in 2006, the transformation project was slated to be completed in three years, which means it will be reaching its deadline at the end of this year.

Here are the ambitious goals Mott and HP CEO Mark Hurd set for themselves:

Reduce the IT budget from 4% of revenue to 2%. Consolidate 85 data centers worldwide to six in the United States. Cut the number of applications being supported from 6,000 to 1,500, and the number of IT projects being worked on from 1,240 to 700. Pare 19,000 IT workers, both HP employees and contract workers, down to 8,000. Swap the ratio of IT personnel working on old applications versus those developing new ones from 70%-30% to 20%-80%, and increase the percentage of IT projects delivered on time from 81% to 98%.

Here's the progress report:

Hurd told the Austin crowd that the fiscal year 2005 IT budget, all things accounted for, was actually greater than 5% of revenue, which makes the reduction effort that much more ambitious. Mott told me he expects to end FY '08 and head into FY '09 at an IT run rate of less than 2% of revenue.

The six data centers--two in Austin, two in Houston, and two in Atlanta--are operational. So far, 28 of the old data centers have been shut off and 700 applications moved into the new ones. "All the [old] data centers have less applications and less servers than when we started," Mott says. "We're managing [the migration] more at the application-retirement level."

The number of applications now stands at 3,300, and active IT projects are actually down to less than 500. Mott says he'll get close to the 8,000 mark for IT workers, but just as important is that the ratio of HP IT employees to contract workers will shift from approximately 50-50 in 2005 to about 90-10. However, on-time delivery of IT projects stood at just 88.5% at the end of FY '07, and the number of IT employees working on new applications made it to only 55%. "We won't make 80% by the end of '08," Mott admits.

To fund the project, Hurd agreed to a capital investment of 2% of the company's 2005 revenue (over and above the IT budget). "We will underspend our plan on capital," Mott predicts, mainly because the price-performance of the new technology he's using (mostly HP stuff, natch) is better than anticipated.

Mott calls this project "my biggest challenge"--this from a man who has tackled some big IT challenges in his 29-year IT career, including implementing Wal-Mart's sophisticated data warehouse back in the 1990s. That project was a game changer in the retail market, Mott points out, with sincerity and very little self-aggrandizement. Now Mott wants to do it again in the technology industry: "I want to be that game changer in our market."

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