HP wins £244m Telecom Italia contract

Hewlett-Packard will today announce a five-year $243.5m contract to manage desktop computers for Telecom Italia, a contract that continues HP's momentum in information technology outsourcing agreements.

HP will handle desktop systems for the Rome-based telco's 90,000 users, with services such as help desk support and maintenance. About 600 Telecom Italia employees are scheduled to move to a new HP entity focused on desktop systems management. In addition, HP and Telecom Italia have agreed to join forces to host SAP business software systems for other companies in the future.

The deal "definitely expands our business in Italy" and in regions of Europe, the Middle East and Africa, said Joe Hogan, HP's vice president of marketing for worldwide managed services. "It's another large deal for us."

Telecom Italia expects the deal to cut its IT costs and allow it to focus on its core business.

The agreement will take effect after consultations with worker unions have been completed and the Italian Antitrust Authority has given its blessing, HP said. Hogan said such hurdles are typically cleared within 120 days.

HP's outsourcing unit is making waves these days. In December, HP announced a five-year deal worth "hundreds of millions" of dollars to manage the technology behind DirecTV's billing operations. And last month, HP said it landed a contract to run automotive supplier Delphi's SAP business software in North America and Singapore.

Although smaller than rivals IBM and EDS in terms of overall services revenue, HP recently beat out these giants and other business technology outsourcing companies in a customer satisfaction study published by Information Week. HP placed first.

IT outsourcing represents a bright spot in a dreary IT spending climate. As companies have focused on trimming costs, they've been willing to turn to IT outsourcers. IBM and EDS also have announced significant IT outsourcing contracts in the past few months.

HP's managed services unit grew 14 per cent year over year in the October quarter. Overall, HP's services division - which also includes customer support and consulting and integration units - saw its revenue fall 3 per cent year over year to $3.1bn.

HP Services accounted for 17 per cent of the company's $18bn in revenue in the October quarter.

More and more IT outsourcing work may be done at low-cost facilities overseas, as US IT services companies ramp up offshore operations to compete with Indian IT services providers. Market research firm Giga Information Group predicts IT outsourcing to India alone will grow by 25 per cent this year.