P&G HP Pact-Slow and Steady

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.

HP used its OpenView software and other applications to build a cockpit that shows all of P&G's technology infrastructure with performance metrics, such as the performance of SAP in the company's German subsidiary. The whole project took about six months to complete.

HP's biggest challenge, according to Talbot, was meshing with P&G's homegrown culture where "everyone was hired out of school and had 20 years' experience working together." P&G's technology staff knew how to get projects done by using an informal network. That network moved quickly and was successful, but HP needed formalized practices such as escalation procedures and statements of work at the start of a project, he adds: "Our challenge was becoming part of that network."

Putting structure into P&G's processes will be critical for the next phase of the project as well. In year two, HP is expected to deliver a report on how to refine P&G's business processes and bring in innovations such as chip-based tagging of its products.

P&G says it will ultimately grade HP on how technology initiatives help the retailer break into new markets and extend its brand. This will also require new metrics, such as the time needed to fill service requests and the time frame for implementing a new discipline or technology, Talbott says.

HP is also urging P&G to pay for services when asked for, known as "on demand." To do that, though, HP has to complete installation on a host of monitoring systems. Exact figures weren't disclosed, but more than 50% of HP's services to P&G are billed on consumption, Talbott says.

In the beginning of the deal, HP was charging per mainframe, worker, server and bandwidth. For the remainder of services that aren't delivered on demand, HP is billing per person or resource, as in a traditional outsourcing pact. Talbott wouldn't put a timeline on completing the switchover to the demand-driven approach, but he contends that "we're making significant progress."

How P&G Says You Should ROLL OUT OUTSOURCED SERVICES

• Go Slow
  Make sure the services you're providing to customers, partners and employees stay high-quality.
• Manage Daily
  Don't underestimate the time needed to manage and monitor the outsourcer.
• Centralize Operationsbr> It's easier to manage when technology services emanate from one place.
• Govern
  Create a governance council to oversee outsourced work, particularly if you have multiple providers.