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HP Services takes lumps, posts losses

EnginesoonOne element consistent in HP 3000 migrations: the loss of support from the system's maker. HP's support operations include the HP Services unit, the artist formerly known as EDS. A couple of recent news items point at a loss in value when customers hire HP to support their systems.

A report in the Wall Street Journal's blog All Things Digital says that HP's CEO was in Australia last week, apologizing to a major bank about a Windows patching failure. It was serious enough that the mistake will take months to correct, according to another story in the Aussie tech website Delimiter.

One industry source with knowledge of the situation said they had never seen a situation quite like it in Australia. The problem is believed to have affected around a quarter of the bank’s desktop PC machines.

While HP's Meg Whitman was visiting the Commonwealth Bank of Australia, her company announced that the head of HP Services was "leaving the company to pursue other interests." HP also reported it will take an $8 billion charge on its Q3 finances as a result of "the impairment of goodwill within its Services segment."

Customers might wonder if a major bank IT meltdown and the Services charge are related. Whether they are or not, the Services engine that pushes HP profits and growth -- and contributes to some exodus of 3000 sites -- is sputtering this year.

HP appointed Mike Nefkens, currently senior vice president and general manager of HP Enterprise Services EMEA, to lead HP ES on an acting basis. HP also announced that J.J. Charhon, senior VP and CFO of HP ES, was appointed as COO for HP ES. "Charhon will focus on increasing customer satisfaction and improving service delivery efficiency, which will help drive profitable growth," HP promised.

Some analysts say the $8 billion writedown is happening because HP now admits it paid too much for EDS. The price was almost $14 billion in 2008; HP had to take on 144,000 employees, too. This doubled the HP payroll.

Although there is not a lot of activity in the 3000's homesteading group for services and support transfers, the mere fact that HP claims to support its Windows and Unix customers is enough to spark some migrations. Services contracts like the one at Commonwealth are not the same thing as line support from HP's Business Recovery Specialists. Hiring HP to do your IT, via its SE unit, is outsourcing via the vendor.

But this summer as part of its 27,000-employee purge, HP did a "workforce reduction" move on one BRS expert who served HP's Unix and Superdome systems. He'd been with HP for 16 years, and moved to his terminal HP job after supporting HP's 3000 customers. His first exposure to a 3000 was with a Series 68, when he was a $4 hourly operator at his father's employer.

Support, in all of its forms at HP, makes a lot of profit for the company. Shave off $8 billion and you're that much closer to a quarter where there's no profit to mention. HP's first quarterly loss might be in the offing, if not for some clever accounting. Expect to hear a lot of "non-generally accepted accounting practices" numbers in HP's Q3 report Aug. 22.

If your HP support is tied to a company posting a loss, it would be worthwhile to compare that strength to an independent's support of a 3000. That would be especially true if you're facing an exodus from an MPE system which is still running as well or better than any replacement package.