HP execs: Here's how we plan to save our most troubled business unit
This unit has undergone constant layoffs since 2008 when it was formed as HP bought EDS. Whitman promises the current restructuring, which will cost $2 billion, is the last big one.
Execs promise that HP ES's revenue will stop shrinking in Fiscal year 2018. It has reduced its expenses by $1.4 billion, most through layoffs, automating more tasks, and shifting workers from expensive locations like the US to low-cost locations like Manilla, Costa Rica, and Bangalore, Whitman and Nefkens explained.
HP promises ES will deliver 7% to 9% profit margins. Much of that comes from eliminating workers in high-cost-of-living parts of the world like US, Canada, and Europe. In 2013 36% of ES workers were in low-cost offshore locations. By 2018, 60% of them will be low-cost offshore locations. The company is currently at 40%, Nefkens said.
Although much of the $1.4 billion in cost cutting is coming from trimming and shifting its workforce, ES is also closing data centers, using more automation, and watching spending in other areas, Nefken said.
General manager Mike Nefkens says that sales at HP ES is winning more deals (double digit improvement), costs are down since 2013 and customer satisfaction is up 11 points.
This slide shows how HP has been adding more clients for HP reducing its reliance on any particular customer. "In 2013, three accounts made up 65% of our operating profits. Today, no single account represents more than 10%," the unit's GM Mike Nefkens said.
Sales to new customers and add-on sales to existing customers is up 8%. HP ES also has 22% more deals in its pipeline, hoping to turn those into signed contracts.
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