The New HP Way: World's Cheapest Consultants

Date: Thursday, December 05, 2002 10:12 PM

H-1B and JOB DESTRUCTION NEWSLETTER

www.ZaZona.com

HP seems to feel that the way to "damage" IBM is to get cheaper labor from
India and China. It seems as though the newest corporate fad is to brag
about how cheap their labor costs are. The winners in this race to the
bottom are the ones who can squeeze their workers the most. How far away are
we from slavery?

http://www.forbes.com/home/2002/12/05/cz_qh_1205hp.html

Consulting
The New HP Way: World's Cheapest Consultants
Quentin Hardy, 12.05.02, 11:26 AM ET

Tech giant Hewlett-Packard has seen the future of technology consulting.
It's on the other side of the globe and it's really, really cheap.

"We're trying to move everything we can offshore," HP Services chief Ann
Livermore told Wall Street analysts at a meeting Wednesday. "We're
aggressively realigning our resources." Short term, that means adding to the
software and services personnel HP (nyse: HPQ - news - people ) already has
in India. Further out, HP expects China to also turn into a major consulting
center.

The plan addresses a trend toward lower-priced consulting that's been
hurting HP. The company's $3.1 billion fourth-quarter services revenue
(total fourth-quarter revenue was just over $18 billion) was off 3% from a
year before. Consulting and integration revenue was the weakest part of
services, down 17% on the year. Livermore, with the blessing of Chief
Executive Carly Fiorina, is betting that HP can both lower its costs and
damage industry leader IBM (nyse: IBM - news - people ) by slashing services
prices with cheaper bodies.

As if the high-priced, oversupplied consulting industry didn't have enough
to worry about. The field has suffered during the past two years' downturn
in technology spending. How bad has it gotten? PricewaterhouseCoopers, which
almost sold its PwC consulting business to HP two years ago for $18 billion,
managed to finally unload its concern to IBM this year for just $3.5
billion. IBM added the 30,000 consultants to its Global Services Business in
an effort to smother consultancies like EDS (nyse: EDS - news - people ) and
Accenture (nyse: ACU - news - people ). Competition remains fierce, too: As
Livermore pointed out, a laid-off consultant isn't like a factory that gets
mothballed during a recession--he's still out there looking for business.

"The oversupply doesn't go away," she said, "consulting and integration is
going through a tremendous transition, with constant price pressure."

According to Jurgen Rottler, vice president of marketing, strategy and
alliances at HP Services, HP will grow in India, building on the "several
thousand" services people the company already employs there. "In an ideal
world," he said, "you'd migrate as much as you possibly could to India."

Many of HP's Web applications for Microsoft's (nasdaq: MSFT - news -
people ) .Net initiative will be written in India, Rottler predicted. HP and
Microsoft recently announced HP would be a prime global integrator for .Net,
a "Web services" move to put more interactive software on the Internet.

HP figures a good high-end programmer in India costs about $20,000 a year,
about a quarter the U.S. cost. And things could get even cheaper. "We see
China gaining on India about three or four years from now," said Rottler. HP
is also developing staff there.

HP stands to have plenty of company developing the Indian services industry,
however. Already, local firms such as the Tata Group (which is traded on the
Bombay Stock Exchange), Infosys (nasdaq: INFY - news - people ) and Satyam
(nyse: SAY - news - people ) have boosted their software and consulting
arms. Microsoft's recent $400 million investment in the country, building on
a strong programming presence already there, is designed to boost education,
business partnerships and software development.

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