Why Most of HP's Layoffs Will Be on the Services Side

By CIOinsight  |  Posted 05-25-2012

Hewlett-Packard, fresh off a tough day May 23 in which it announced a whopping 27,000 job cuts over the next two years, continues to revisit its overall mission, evaluate all its businesses, and stabilize its leadership. Can't argue with those best executive-type practices.

Looking closer at the job cut details, it looks very much like HP is trimming back much of its service business and planning to plow that savings back into its research and development, which had been cut way back for five years under Mark Hurd. Hurd was three CEOs ago, by the way, and he only left the company in August 2010.

Those 27,000 full-time jobs--though a high number on the face of it--represent only about 8 percent of its workforce of 349,600. Yet, when the jobs are all eliminated by the end of fiscal 2014, it will be the largest layoff in the company's 73-year history.

CEO Meg Whitman and the HP board know they have to be the bad guys here. Everybody knows it. The questions are: 1) Who stays, and 2) who goes?

eWEEK learned from a trusted inside source that a substantial number of those cuts--possibly as many as 15,000--will come at the expense of the company's Texas-based HP Enterprise Services division, formerly known as Electronic Data Systems, or EDS. HP bought EDS, which was founded in 1962 by H. Ross Perot, for $13.9 billion in 2008. Palo Alto, Calif.-based HP said it expects to save as much as $3.5 billion per year from the job cuts and other internal fiscal measures.

HP is calculating a total of $129,629.63 for each of those 27,000 people, give or take a few dollars and people. That, of course, would include salary, benefits, retirement and other categories for each person.

Is HP Throwing in the Towel on Services?

Why exactly is HP cutting back so severely its service force? Is it giving up in its decades-long turf war with IBM, and allowing newer kids on the block (Oracle, Dell, EMC and Cisco Systems) to move in?

HP isn't talking at this time, but you can bet the answer would be a stout "no." The relevant terms here are "streamline" and "more efficient operations." HP is not only trimming a lot of service-related jobs, but it is also becoming a more efficient company internally in order to save costs.

It is well-known also that HP wants to invest heavily in its new Converged Cloud initiative to help refresh some of those thousands of data centers that need updates.


To read the original eWeek article, click here: Why Most of HP's Layoffs Will Be on the Services Side