5 Ways HP Cut Costs and Fostered Innovation

HP is a massive company that has been around for a very long time. Over the years, it has acquired a vast number of companies including such IT players as Compaq, Digital Equipment Corp, EDS 3Com, Palm and 3PAR. Those acquisitions continue today at a rapid pace.

In that light, it’s perhaps not surprising that the company had accumulated a sprawling IT structure consisting of a vast number of data centers, server closets, geographies, platforms, applications and internal IT tools. All told, it had amassed 85 data centers in 29 countries running over 7,000 applications and 700 data marts. For the internal-facing IT personnel alone, 1,240 active business projects were taking place.

HP CIO Randy Mott realized that major change was needed. He cited Mark Twain, “If you do not change direction, you may up where you are heading.”

Here are five ways the company reduced IT spend while raising efficiency and fostering innovation:

Innovation mindset

The volume of legacy technology the company had gathered over the years, was tying up immense numbers of IT hours and holding the company back in implementing its expansion plans. The reason? Mott worked out that IT ended up spending most of their time on maintenance, troubleshooting and babysitting of what they had. No more than 20 percent of the total IT hours were being devoted to the innovation that a highly competitive business environment demands.

“Legacy technology has a huge overhead in terms of cost,” said Mott.

By carrying out his plans for centralization and modernization of IT resources, he freed up enough resources so that IT now spends 50 percent of the time on innovation.

Insourcing

HP had a major outsourcing inclination over the past many years. The company had previously utilized contractors for about half of its overall IT operations. Contrary to many trends, Mott shifted the emphasis to internal employees as one element of a cost cutting strategy in the midst of his consolidation project.

“Ninety percent of our IT work is now done internally compared to 50 percent before,” said Mott. “IT spending has been reduced from four percent of total revenues to only two percent.”

Cheaper cooling

For power and cooling, the company sought out the most cost-effective and environmentally friendly systems possible. Facilities in Texas, for instance, have been built with 214 kW of photovoltaic (PV) cells.

Instead of expensive mechanical chillers that require a lot of water in areas where it is at a premium, HP is harnessing a water-cooled chiller which uses water from onsite wells. To minimize water consumption, waste water is treated and used for irrigation on campus.

The results of this energy reduction drive have been spectacular. Even while deploying all the latest high-density gear using multi-core processors and virtualization, the company still slashed energy consumption.

“We have increased our power consumption per square foot by three times while bringing about 60 percent less energy usage for IT,” said Mott.

Fewer data centers

One obvious way to slash costs was through data center centralization and hardware consolidation. Over the space of a couple of years, Mott oversaw a transformation that brought the numbers down to six data centers at three locations, less than 1,700 apps, one enterprise data warehouse, and only 500 active business projects. These data centers comprise 578,000 square feet of raised floor space. They are situated in the vicinity of Houston and Austin Texas, and Alpharetta, Georgia

As would be expected, the company installed the latest HP technology for storage, networking, servers and remote data center monitoring. This includes HP ProLiant servers, HP StorageWorks disk arrays, HP Converged Infrastructure networking and a whole lot more HP hardware and software.

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