HP lines up $3bn Procter & Gamble outsourcing deal

Hewlett-Packard on Friday announced that it is on the verge of scoring two major IT outsourcing deals.

The company said it plans to manage Procter & Gamble's IT infrastructure, including data centres, desktop and end user support, and maintenance support for the consumer products giant's operations in 160 countries. The agreement still needs to be made final, but the companies said it will be worth $3bn within the next 10 years. The companies expect to reach a definitive agreement in May.

HP also said on Friday that it has signed a memorandum of understanding with Ericsson to provide IT services for the mobile equipment maker's global operations. At this time, the memorandum establishes the principles of how the two companies intend to work together. No financial terms were disclosed for the deal, but the final agreement is expected to be signed before the end of the second quarter.

IT outsourcing deals have been bright spots in an otherwise listless technology sector. Market researcher Gartner has predicted that the IT outsourcing marketing in North America alone will rise from $101bn in 2000 to about $160bn in 2005. Gartner has also warned that half of IT outsourcing projects will be considered unsuccessful in 2003 because they will not deliver the expected value.

HP competes in this field with companies such as IBM, Electronic Data Systems (EDS), Computer Sciences and Accenture. HP's outsourcing unit in recent months has landed big deals with Telecom Italia, satellite television provider DirecTV and US automotive supplier Delphi.

HP services chief Ann Livermore said the company beat rivals IBM and EDS to the Proctor & Gamble deal. Livermore said her unit won over Proctor & Gamble for reasons including confidence that HP would be a good employer for some 1,850 Proctor & Gamble employees moving to HP and also for the quality of HP's services.

Proctor & Gamble is "really placing a 10-year bet that HP's going to be the leader in the industry," Livermore said.

In both the Proctor & Gamble and Ericsson deals, HP is winning business that it didn't previously have. An HP spokeswoman said HP has provided services to Ericsson in the past, but the memorandum of understanding relates to a different set of IT tasks.

Sandeep Junnarkar writes for News.com. News.com's Ed Frauenheim contributed to this report