P&G HP Pact Slow and Steady

By Larry Dignan  |  Posted 2004-07-29 Print this article Print

Procter & Gamble's outsourcing deal with Hewlett-Packard has used a stable, no-frills approach to make the consumer-product giant's technology infrastructure more efficient.

During the first year, HP also met or exceeded P&G's "critical measures" such as service level availability and problem resolution time in 95.78% of cases, according to the two companies. During the last six months, the average was 97.41%.

"We've been very careful not to disrupt service levels," Talbott says. "Our approach was not to move operations right away. It's not uncommon that after you move operations, service levels decline."

Just as important: not disrupting people.

"The big goal for us was making sure that employees who came to work August 2 last year didn't notice anything different from August 1," says Damon Jones, communications manager for P&G Global Business Services.

For HP, the P&G deal is critical in its quest to be taken seriously as an alternative to services giants such as IBM and EDS. The August 2003 deal was the first big splash for the company's services business following its merger with Compaq Computer, which gave HP a total of 65,000 consultants, a large number but roughly half of IBM's or EDS' army.

Recognizing that HP was a cultural match but new to large outsourcing pacts, P&G deployed a "two-in-a-box" system. The setup paired an HP manager with a P&G counterpart to manage the transition on fronts such as human resources, technology infrastructure, applications and contracts. HP's role was to figure out how to make the transition, with P&G taking a support role. In areas where HP had little expertise, such as the contents of P&G's 5,000 technology contracts globally and their various regulations and tax rules, the consumer-goods giant took the lead role, Clement-Holmes explains.

HP has thrown more resources at P&G than expected, Talbott says, but he wouldn't describe the number of additional people or the amount of extra money devoted to its tasks. For the second quarter ending April 30, HP Services revenue grew 15% year-over-year to $3.5 billion, with an operating profit of $329 million.

For P&G and HP, much of the first year was spent putting more rigor behind project management processes. The biggest move was to create a project management office that will oversee tasks such as upgrades to SAP software, revisions to the data warehouse architecture, and the integration of the operations of beauty products company Wella, which P&G recently acquired, into its systems.

Today, projects have clear requirements and are tracked to completion. P&G also spends more time defining requirements for, say, a new release of SAP. "P&G can spend more time on defining needs since HP has the 'how' part," Clement-Holmes says.

HP's other big contribution was to create metrics to monitor all of P&G's systems. For instance, P&G's global technology services unit had less-than-stringent internal service level agreements with the various divisions of the company. As HP took over P&G operations, it began formalizing measures of service for everything from how enterprise systems performed in China versus Singapore to network availability to data center management.

Prior to working with HP, P&G had 73 measurements for service levels, focusing on items such as network availability and storage capacity. Now that HP has formalized the process, there are 181 service level measures, targeting enterprise planning application performance by business unit, technology services consumption and costs per resource.

According to Tom Hachiya, an HP client manager on the P&G account, many of P&G's old systems weren't designed to be measured. If a network worked, that's all you knew. "The hardest part was creating consistent metrics for legacy applications," Hachiya says. "There was no common way to measure performance in an ERP system globally."

Next Page: Using software to measure performance.

Business Editor
Larry formerly served as the East Coast news editor and Finance Editor at CNET News.com. Prior to that, he was editor of Ziff Davis Inter@ctive Investor, which was, according to Barron's, a Top-10 financial site in the late 1990s. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism.

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