Variety is key to HP success story in Ireland

 

Martin Murphy, managing director of HP Ireland, tells John Collins that the focus of the group's varied operations here has been on innovating and creating new markets

While other multinationals operating in Ireland might focus on a particular area of their parent corporations' business such as supply chain, manufacturing or software development, Hewlett-Packard (HP) has a variety of operations in Ireland that in many ways make it a microcosm of its parent.

HP Ireland is the sales and services division that sells to customers in Ireland, but HP also has four other significant operations here: a print head manufacturing facility; the headquarters of its Europe Middle East Asia (EMEA) financial services division (both on a large campus in Leixlip), a significant European customer support operation in Dublin's Clonskeagh and a software development centre in Galway, which was founded during Digital's heyday in that city.

According to Martin Murphy, managing director of HP Ireland: "In the last three years, each of those entities has done a good job of innovating and creating new markets."

During that time, the inkjet manufacturing facility has added a manufacturing R&D and product development remit. Earlier this year, the HP bank announced the creation of 100 new jobs by centralising its European operations in Leixlip; the software centre continues to develop for HP worldwide, while the support operation has moved away from "frontline break/fix support" into more sophisticated support around managed services and also offers a European help desk.

Perhaps the most startling transition, though, has been at HP Ireland. It has almost tripled revenues by moving from straight product sales to offering outsourcing and managed services. The headline success has, of course, been the deal with Bank of Ireland, which saw HP take on its IT staff and manage all its technology in a seven-year deal valued at €500 million.

A review of the local market after the 2003 merger with Compaq led to a key decision, which at the time looked like a risky one. With data centres around the city shutting up shop and everyone questioning the value of the internet as a platform to deliver applications, HP made the decision to enter a lease on a 60,000 sq ft data centre in Citywest, formerly occupied by dotcom star Metromedia Fibre Networks.

"When people were getting out of the data centre business, we decided to get into it because we believed it was the future," says Murphy. "We believed there was a very strong business case over a five- to seven-year business plan. It was a risky venture, but it worked out well for us."

That centre now houses more than 25,000 servers for Irish customers and Murphy says it will "very shortly" be at capacity.

Having the data centre has enabled HP to win deals such as Bank of Ireland, but also smaller but significant contracts such as the recently announced deal to offer IT as a shared service to 14 institutes of technology worth €20 million over the next seven years.

In fact, the first major breakthrough in outsourcing for HP was relatively unheralded. It won the managed services contract for the massive Classroom 2000 educational project in Northern Ireland, which was worth over €200 million.

Murphy compares that deal to breaking the four-minute mile: "Nobody believed it could be done and no one thought it would be done again."

When the Bank of Ireland deal came along shortly afterwards, Murphy believes it created a whole new market in Ireland for outsourcing.

There may not have been subsequent headline-grabbing deals, but Murphy says many organisations are routinely turning to selective outsourcing of elements of their IT infrastructure.

He still feels there is plenty of scope for growth for HP locally - by identifying new markets and getting the most from existing ones.

Like many multinationals, HP doesn't break out Irish revenues, but various studies, including The Irish Times Top 1,000 Companies, would suggest HP has annual revenues here of €2.5 billion, which Murphy admits is in the right ballpark.

Despite HP's diversity, the majority of its profits still come from its imaging and printing group. Competitors like to put it down as "the printer company", while some analysts have suggested it should hive off the printer business and get on with innovation.

Those calls have been falling off since the appointment of Mark Hurd as chief executive to replace Carly Fiorina, a charismatic executive but one who didn't ultimately have the support of investors or the HP board.

Hurd, in contrast, has overseen a simplification of company structures and the share price has doubled during his tenure. Murphy believes Hurd has energised the whole company and refocused on its core strengths.

"Locally, we need to take the best practice from corporate and blend that into the needs of the local market," he says.

"That's a constant process that will happen every six months, as we set out new targets for the business. There are some areas from a technology standpoint where Ireland would be very strong and some areas where we wouldn't be as strong. For instance, in Ireland the services market is very strong both North and South. The bulk of our contracts are services led."

Although upbeat that problems such as Ireland's broadband deficit will be solved "within three years", when he expects most homes to have a PC, Murphy is concerned that recent high-profile problems with IT projects, such as PPARS, could defer Government investment in IT.

"One of the areas we would be actively talking about is whether or not Government and industry really see IT as being a productivity tool, if they see them as a vehicle to make the business more competitive, [ to] drive down the cost of doing business and innovate.

"The concerns we've got is we are not necessarily seeing a huge appetite there to drive that. We see it has to be done to rise to the challenge of the future."