HP, Outsourcing, Chief, Offshore

New HP outsourcing chief wants to take IT offshore

Hewlett-Packard last week named company executive John McCain to run its $15.5 billion global services business.

McCain, 47, has served as senior vice president of HP's consulting division since December 2005. Prior to joining HP, McCain served as chief executive officer of iEnergizer, a privately held, business process outsourcing services company. Previously, he was chief executive officer, North America, at Capgemini, and spent 16 years at EDS, where he held various executive positions within its e.Solutions, CIO Services and Commercial Services units.

One of McCain's first objectives is to keep up with fast-growing offshore rivals. HP is creating a sales team that will focus exclusively on selling US customers on the benefits of outsourcing work to HP's technology centers in India, said the HP executive in charge of the effort.

HP's services business is robust, accounting for about 18 percent of the company's total revenue. But it has seen little growth in recent quarters as more and more US businesses outsource work directly to domestic Indian vendors or service providers whose primary operations are in India. "It's very late for HP to be recognising what is a profound change in the global, competitive environment," said James Friedman, an analyst at Susquehanna International Group.

Over the first three quarters of 2006, HP's outsourcing business has posted a sequential compound growth rate of negative 0.02 percent. By contrast, India-centric rival Cognizant Technology Solutions posted a compound growth rate of 14 percent over the same period. Last week, Cognizant reported sales of US$1 billion for the first nine months of 2006 and raised its full year revenue outlook to US$1.40 billion.

McCain said HP won't significantly increase its operating capacity in India in the near term. "Our footprint in India is pretty good. I'm satisfied with our facilities there," he said. HP operates development and service centers in Mumbai, Hyderabad, Chennai, and several other Indian cities. What the company needs to do, McCain said, is increase sales at those locations. "The Indian firms are growing by leaps and bounds; we want a bigger piece of that."