Outsourcing Deal Gives P&G Clout With HP Execs

A 10-year, $3 billion pact regularly brings top HP execs to P&G's offices.

PHOENIX -- When executives at The Procter & Gamble Co. seek answers from the company's IT outsourcer, Hewlett-Packard Co., they don't have to deal with help desks, trouble tickets or support tiers.

Instead, they most likely work directly with someone in the top levels of HP's executive ranks.

The Cincinnati-based consumer product maker's clout with HP might make some of the latter's other customers a bit jealous, but the two corporations are in the midst of a 10-year, $3 billion mega-outsourcing deal that carries high stakes for the bottom lines of both parties.

The contract, signed in 2003, called for HP to take over P&G's IT infrastructure and hire some 2,000 of the company's IT workers.

In a presentation at Computerworld's Premier 100 IT Leaders Conference here earlier this month, Jim Fortner, vice president of IT development and operations at P&G's business services division, said constant communication between executive suites is imperative in such large and costly deals.

For instance, Ann Livermore, executive vice president of HP's enterprise business, travels to P&G headquarters about six times a year to take part in a joint review of the vendor's performance. HP CEO Mark Hurd attends those meetings about twice a year.

"[HP executives] are wired into our business," Fortner said. "When you have the CEO of a company sitting across the table saying, 'We're going to deliver this,' you know they're going to deliver."

Maintaining close relationships with all of its IT vendors has long benefited P&G, particularly when it bought Gillette in 2005 for $57 billion. Within two weeks, P&G's partners had assembled a team to start integrating Gillette's IT systems.

Robert Joslin, an analyst at Everest Group, a Dallas-based outsourcing research and consulting firm, said having access to top executives is "extremely critical to the success of an outsourcing relationship." In fact, the contract should stipulate that specific executives of the service provider will meet regularly with senior managers from the client firm.

The level of access to a vendor's senior executives will depend to some extent on the size of the contract and its strategic importance to both parties, but "you do try to go up as high as you can," said Joslin.

Top-level access "increases the probability that it will be a successful relationship for both parties," he noted.

Therefore, he contended, you should make decisions about when meetings will be held and who should attend before a contract is signed.

At P&G, having HP manage the IT infrastructure allows data center personnel to focus on other tasks. They're currently developing tools designed to simulate the in-store tendencies of potential customers. Simulation "is really big for us," said Fortner.

For example, the company has created a Second Life-like environment where users can interact virtually with simulated displays of products on store shelves; they can even take items off the shelves and read their labels. The simulations are coupled with back-end analytics to assess the impact of changes to displays.

This version of this story was originally published in Computerworld's print edition. It's an edited version of an article that first appeared on Computerworld.com.

Copyright © 2010 IDG Communications, Inc.

  
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