Monday, December 01, 2008

H-P cuts IT spending in half

H-P's IT spending is planned for about 2% of revenue in 2009, compared to 4% in 2005. That's a 50% cut, but it's not because of the weak economy. Rather, it is the result of an aggressive IT restructuring and consolidation project initiated several years ago by CEO Mark Hurd and CIO Randy Mott.

According to the Wall Street Journal:
The IT restructuring began just after Mr. Mott joined the company in July 2005, and will lower IT costs by more than $1 billion a year from that year's levels, in line with its estimate when it began the plan.

H-P will be able to reduce spending on internal IT from about 4% of revenue in 2005 to less than 2% in 2009.

The company also consolidated more than 85 IT data centers globally to six centers in three locations, which are expandable to accommodate growth. It also consolidated more than 6,000 applications running the business to about 1,500.

The company reduced its annual energy consumption in its data centers by 60% as it decreased the number of servers by 40%, while increasing processing power more than three-fold.
Technically, organizations such as HP show up in the list of companies cutting IT spending this year. But again, it has nothing to do with weak economic conditions. Rather, it has to do with a broad trend toward consolidation and finding efficiencies in delivery of IT services. Sun Microsystem's massive ERP consolidation project is another example. Remember this when you read the reports of IT spending cuts this year. Some of it would be taking place even if the economy were booming.

Related posts
Sun's massive ERP consolidation effort
HP's new CEO: the un-Carly
What went wrong with HP's SAP migration?
HP blames SAP migration for revenue shortfall

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