IT Jobs
Recession forces HP to adopt 'variable pricing'
EDS division bites on pick-n-mix.
By Patrick Thibodeau, Computerworld (US)
Published: 09:45 GMT, 11 March 09
In an effort to make its outsourcing and IT services more affordable in a down economy, Hewlett-Packard is changing its services pricing to a model that's akin to ordering a customised laptop.
The new approach may have its broadest impact on how HP prices the application support services offered by its Electronic Data Systems unit. HP, which acquired EDS last August, said that users now will be able to specify different application service levels based on the importance of individual apps.
For instance, a company could set high service levels for critical applications that require a rapid support response, such as order processing, while others that aren't as central to business operations could be designated for lower levels of service - with HP's pricing varying accordingly.
The change isn't a price cut, according to HP officials. But the variable pricing could reduce overall application support costs by as much as 40 percent for customers, said Jeff Womack, vice president of product marketing at EDS.
Womack said EDS is also "unbundling" its IT infrastructure services, which include support of servers and storage devices, so they can be aimed at smaller companies - for instance, businesses with as few as 100 servers to support. HP thinks the new approach will enable EDS to go after a broader customer base, beyond the large enterprise users that it has focused on until now.
John Madden, an analyst at consulting firm's Ovum's office in Boston, said that HP is trying to be proactive in response to the economic recession. "If you have customers that are hurting financially," Madden said, "do you pound them over and over again with the same terms?"
But he added that HP also may be looking at the competitive challenges that outsourcing and IT services vendors like EDS face from cloud computing services, which typically are based on variable pricing.
In addition to the new pricing options, HP is changing the way it designs data centres for customers, also to give them more choices.
Data centres typically are built to one of four reliability levels, as defined by Uptime Institute in Santa Fe, N.M. Tier 1 is the lowest level and Tier 4 the highest, with redundant systems and the least potential for downtime.
HP now will offer customers the ability to set up data centres with different tier levels, a move that could reduce building costs by as much as 25 percent, said Peter Gross, vice president and general manager of the company's HP Critical Facilities unit. That's the new name for what was EYP Mission Critical Facilities Inc., a data centre design firm that HP acquired early last year.
The design process will incorporate a "building block" approach, with variable levels of redundancy and fault-tolerance, Gross said. He added that users will be able to adjust the amount of space given to the different tiers as business needs change.
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Lenin | Published: 11:53 GMT, 11 March 2009
HP really made a proactive decision by adopting 'variable pricing' model as they start to see a heavy competition rising from cloud computing platform. Service Providers already started looking at the cloud computing areas and the real challenge is how HP + EDS is going to face this recession.