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Hewlett-Packard educates clients on its three-year technology overhaul project

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The entrance of Hewlett-Packard’s headquarters in Palo Alto, California, is pictured on Aug. 20, 2005.

PHOTO: AFP

Hewlett-Packard Co, the world’s largest personal-computer maker, wants to capitalize on a three-year overhaul of its technology operations by persuading customers to follow its lead.

“The company held events for more than 1,000 customers over the past 18 months to explain how it cut technology expenses by US$1 billion a year,” chief information officer Randy Mott said.

More than 400 employees are part of an “IT Swat Team” that answers customers questions about the project.

The effort complements chief executive officer Mark Hurd’s plan to expand Hewlett-Packard’s computer-services business, which is almost twice as profitable as the PC unit. The company’s technology overhaul will reduce computer-related expenses to less than 2 percent of revenue next year, from about 4 percent in 2005, savings that other companies could achieve.

“If you think about the way Mark thinks about cost, it’s really now about making sure we’re investing the right amount of that expenditure in the right things,” Mott said in an interview from his office in Austin, Texas.

Mott earned a reputation for his work setting up computer systems and networks at Wal-Mart Stores Inc and Dell Inc. Hurd hired Mott away from Dell, Hewlett-Packard’s main rival, in 2005. Hewlett-Packard’s new computer systems give executives access to more accurate and timely information, in addition to saving money, Mott said.

The overhaul, first announced in 2006, included merging 85 data centers into six and paring the number of information technology staff to 8,000 from 19,000. Hewlett-Packard also cut the number of programs it uses to 1,500 from more than 6,000.

The changes left Hewlett-Packard with six modernized and expandable data centers — in Austin, Houston and Atlanta — that are more energy efficient and pack more processing power.

Hewlett-Packard’s computer-services business almost doubled to US$8.64 billion in sales in the quarter ended Oct. 31, driven by the US$13.2 billion purchase of Electronic Data Systems Corp. The services unit, which accounted for about a quarter of revenue, generated operating profit margins of 10.6 percent, compared with 5.5 percent in the PC group.

The company will continue to refine its systems while working on about 1,000 new technology projects each year, Mott said. They range from adding a factory to reorganizing the supply chain, he said.

“It’s certainly driving the cost elements as low as possible, but then there’s the investment side that says, ‘how many projects do we want to do and what’s the return on them,’” Mott said.

Hewlett-Packard, based in Palo Alto, California, rose US$0.07 cents to US$35.28 on Friday in New York trading.

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