June 1, 2010 -- HP today announced a $1 billion restructuring plan to automate and consolidate the data centers it operates for clients. Along with changes in its IT services business, the moves will eliminate 9,000 jobs at HP in coming years.

In a teleconference, HP EVP and CFO Cathie Lesjak said the plan is to take out cost by standardizing, automating and modernizing data centers, networks and tools. The moves are expected to generate $500 million to $700 million in net savings for HP after reinvestment. While eliminating 9,000 jobs tied to existing data center operations and services, HP says it will be hiring 6,000 new workers to support sales and global delivery centers.

Lesjak and HP EVP Ann Livermore attributed the project largely to HP's successful integration of services and technology from EDS, which it acquired in 2008. The plan will consolidate more than 100 data centers operated for customers to about half that number.

"We'll build these data centers on our converged infrastructure and operate them with our industry leading management software leveraging the experience from HP's own IT transformation," Livermore said. "We'll help our clients modernize and migrate their applications to these next-generation infrastructure platforms. This will allow them to run their IT operations faster and more efficiently."

Livermore said the overall portfolio of infrastructure and services for clients is expected to be a combination of on-premises IT, outsourced applications and additional services delivered by public or private cloud technologies. "We think one of the real differentiators is going to be helping clients with all three services ... and the cloud aspect is very important," Livermore said.

Analyst Dan Kusnetzky of The 451 Group says HP and EDS have managed to cover most all of the elements of the modern technology infrastructure environment, including IT management, provisioning, orchestration, storage and network virtualization.

"They are one of the few vendors I know of that has entries in every single one of the categories of virtualization I've been tracking," Kusnetzky says. "HP has been working hard in their own data centers to consolidate like workloads which in the end will reduce the need for certain systems and the related personnel needed to manage the facilities."   

Livermore said future success for HP will be tightly tied its ability to automate the delivery of service and that the consolidation positions HP to compete effectively going forward.