HP services menu goes a la carte

Dave Wagner had a lot to consider when his five-year services contract with HP neared its end in 2009. With the economy weakening, the CIO at ON Semiconductor in Phoenix realized he couldn’t ink the same outsourcing deal going forward.

“The original deal we signed was fixed. We had gotten the price savings we wanted at that time, but essentially the contract was a black box and there wasn’t the option to add or take away services as business conditions dictated,” says Wagner, who in 2004 contracted HP to provide server platform management and help desk managed services. “The prohibitive pricing model that was in place wouldn’t allow us to grow, so we were going to great lengths to figure out how to keep our server footprint the same size and be net neutral without incurring onerous incremental charges.”

Wagner found an answer thanks to HP’s newly unbundled services offerings and flexible pricing options, which were announced Tuesday via HP’s EDS company.

Acquired last year by HP, EDS now provides customers with a choice of service tiers at different pricing levels, company officials say, which allows customers such as Wagner to better contract services based on business needs.

For instance, EDS Application Management Services now enables customers to pick higher service levels for mission-critical applications and for applications of a lower priority, CIOs can opt for lesser services. In the past, customers would need to apply the same level of service – and price – across their entire application portfolio, which is unappealing for two reasons: the cost is prohibitive and resources are being wasted on non-mission critical applications, says Jeff Womack, vice president of product marketing for EDS.

“Traditionally, the entire application estate would be looked at holistically with the same set of break-fix and availability parameters, making it very difficult to price just portions of the environment,” Womack explains. “This unbundling will also make the benefits of outsourcing more available to others in the market.”

Womack says while EDS and HP traditionally deal with larger enterprise companies for outsourcing contracts, enabling customers to pick and choose services at tiered pricing levels will help the merged vendor appeal to smaller clients. This motivation is also evidenced in another updated service set, EDS Managed Services. According to Womack, the company can now scale its server management offering down to as few as 85 servers and from a service desk standpoint, 1,000 seats.

“From an EDS point of view, those are infinitesimally small numbers,” Womack says.

With companies turning to outsourcing to cut costs during the economic crisis, HP could fare better with its EDS business during the downturn. Among the managed services offerings are: server and storage operations, which provide 24-7 monitoring and support; service desk that is designed to augment in-house support; flexible computing, which lets clients pay only for the computing they use; and managed messaging to tackle availability, security and compliance at a monthly cost for Microsoft Exchange environments.

“With this type of a la carte pricing, which we are getting, customers can get all the benefits of outsourcing yet still get the discounting and pricing one would expect in a volume deal,” Wagner says. “Now we have a model in which we can dial up or dial down services.”

HP also Tuesday introduced a set of services available via another of its acquisitions.

In late 2007, HP acquired EYP Mission Critical Facilities to bring the company’s green and energy-efficient computing experience in house and help companies build better data centers. Now the vendor is offering multi-tiered hybrid design (MTHD), which HP says will help clients bring closer the IT and facilities groups to cut capital expenditures and ongoing costs.

By creating zones in the data center that require different infrastructure support configurations, customers can reduce their spending, says Peter Gross, vice president of HP Critical Facilities Services. For instance, a 50,000 square-foot data center with an average of 100 watts per square-foot built at the highest, tier four, level could cost “north of [US]$180 million,” but by configuring 50 per cent of the applications at tier two and the other half at tier four, clients could save $50 million in capital costs, “never mind the costs associated with operations and energy,” he says.

“The cost differential between the lowest and highest level of tier performance for the data center is substantial and the price difference can be phenomenal,” Gross says.

All services are available now for North American customers. Pricing depends on client environment.

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