HP job cuts point to shifting IT skills

HP to cut 9,000 IT jobs but hire 6,000 others better suited for highly automated data centers

Hewlett-Packard Co. today said it is cutting 9,000 jobs, but also plans to hire 6,000 new workers as part of shift to highly automated data centers that rely less on people with hands-on IT skills and more on those with sales and delivery expertise.

This shift in job skill requirements has been seen throughout the IT industry in recent years, but HP's announcement Tuesday illustrates the trend in a striking way.

In a conference calll this morning, HP executives told investors of the latest step for its Enterprise Services unit, which took a giant leap in size after its 2008 acquisition of Electronic Data Systems Corp. At the time, HP brought on 137,000 new employees .

And what HP planned next for EDS -- a consolidation of its data centers -- was well advertised.

Prior to acquiring EDS, HP had been consolidating its own IT internal operations, reducing the number of data centers from some 85 to six, and using automation to improve efficiency.

HP has been making changes in the former EDS operations since taking over the company, but the scale of what's next -- a $1 billion investment as well as charges against the jobs cuts -- required a call to investors at 5:30 a.m. PDT today, just before the opening of markets.

The 9,000 employees affected by the job cuts likely hold IT operations positions, such as system administrators, said James Staten, an analyst at Forrester Research Inc. The 6,000 new hires can be expected to mostly have IT architectural and sales skills, Staten added.

Today, the EDS data centers are sliced up for various customers uses and mostly underutilized, said Staten, who expects that HP will move those customers to more standardized platforms and technologies, and potentially offering public and private cloud services.

Martin Reynolds, an analyst at Gartner Inc., said that as part of outsourcing deals, EDS acquired a raft of data centers from various customers and improved them, but "they were [still] not as streamlined as HP wanted them to be."

Reynolds expects that HP will move to further streamline those operations by focusing on x86 applications for consolidation and virtualization rather than mainframe and Unix systems. "They are looking to take all those non-virtualized x86 applications and move them to HP's managed environment," he said.

Under its outsourcing agreements with customers, HP can make such changes as long as they don't impact the performance or availability of the applications, said Reynolds.

Analysts said that today's announcement may indicate that HP has had success in convincing customers to accept its data center plans because it will, in the end, reduce the user's IT costs.

HP doesn't disclose changes in its U.S. workforce, but HP's competitors have been reducing the size of the U.S. workforces while increasing the number of overseas workers. It's uncertain what regions will see jobs cuts and hiring in the HP plan.

HP officials have repeatedly said that automation, not lower labor costs, are the key to increasing margins.

"As we look back over the last five to 10 years, most of the activity in the services organizations as a broad industry statement was focused on the location of jobs, geographic locations of jobs and a lot on labor arbitrage," said Anne Livermore, the executive vice president of HP's Enterprise Business, in an HP transcript of Tuesday's investor call.

"We think the next five to 10 years is all going to be about who can best use technology to automate the delivery of services and that no company is in a better position than HP given our technology leadership to use technology to automate the delivery of services," said Livermore

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