Sunday, July 27, 2003

Goodbye to P&G, hello HP

2,000 Procter workers set to be shipped out

By Cliff Peale
The Cincinnati Enquirer

The biggest career change for hundreds of Procter & Gamble Co. employees will start with a thud Friday, as they report for their first day doing the same jobs at the same desks.

The change? They'll be working for Hewlett-Packard Co. instead of P&G. About 2,000 Procter information-technology employees are affected, including 597 in the Tristate.

P&G officials say the deal is good news for the company - it will cut costs and provide more flexibility - and good news for the workers.

"They want our people badly," Filippo Passerini, P&G's global business services officer, said of HP. "They're not going as a commodity."

It's the first - and, at $3 billion over 10 years, the biggest - in a series of contracts where P&G will transfer its employees to other companies to perform back-office work such as help-desk support, real-estate services and employee benefits.

For P&G, it's a sea change as it streamlines closer to its core functions of marketing and product development. That, P&G says, saves money, improves service and provides access to innovation it can't produce on its own.

For affected employees, it's just as big a change. Many have worked at P&G their entire careers - and dreamed of many more years at what once was the elite of career U.S. employers.

Sandra Evans, an associate director in P&G's IT department, was one of about three dozen affected employees who traveled to Palo Alto, Calif., last week to meet with executives at HP Services. She said the message was clear - that P&G's business is critical to HP Services' growth.

"If any of us had any doubt what our position was, it was clear when we went there," Evans said. "Our folks feel pretty confident, myself included, that even if HP did do something to change our role, they really need us."

Shafiq Anwar, a 25-year P&G veteran and associate director in workplace services, said he had planned to finish his career at P&G.

"There's a lot of attachment to a great company like P&G," he said. "At the same time, HP has a lot to offer. Their core business is IT. ... Both companies are strategically positioning themselves around their core business."

Gary Stibel, president of the New England Consulting Group in Connecticut - and a former P&G marketing executive - said that the evolution is one P&G simply had to make to keep up with its competition.

"The companies that don't change are destined to go away," he said.

"I think an employee coming in to Procter has to make a decision: Can I make Procter world-class in my area of expertise?" Stibel added. "They're making a change to make themselves a better lifetime employer of superior talent."

And the trend toward moving business offshore is here to stay. Forrester Research projects that by 2015, more than 3 million white-collar jobs will move to lower-cost offshore locations. And a survey by the outplacement firm of Challenger, Gray and Christmas found that two-thirds of workers think that American companies rely too heavily on overseas workers and are not cultivating enough American talent.

P&G set up its Global Business Services unit in 1999, hoping to cut costs and centralize back-office functions. The unit was built around service centers in Costa Rica; Manila; and Newcastle, England, with hundreds of information-technology workers at the downtown Cincinnati headquarters.

As of last fall, P&G had hoped to lump many of its administrative functions - including computer help desks, employee benefits and others - into the biggest outsourcing contract in the industry's history. It even was within hours of a contract with Electronic Data Systems Corp. on such a deal.

Given EDS' reputation of rough treatment of employees, that deal had many GBS employees nervous about their jobs. But a last-minute EDS stock drop helped torpedo that deal, and P&G decided to break the contract up into smaller pieces. The HP deal is the first of those transactions in a program P&G now dubs "Next Generation."

Others include facilities management, employee services and accounts payable.

Passerini, the Italian appointed late last year to head GBS, said the unit will emerge from the deal with a streamlined role - managing the outsourcing contracts and providing a flexibility for P&G's business units, such as baby care or fabric care - to cut its own costs.

Using the outsourcers, a business unit can get resources when needed, without investing in people and technology upfront, Passerini said.

"How far to stretch the outsourcing out, that's the opportunity for us," he said in an interview. "There's so much more we can get from HP in particular and suppliers in general."

While HP is aggressively moving people and work to low-cost offshore centers, P&G employees shouldn't be apprehensive about losing their jobs to that trend, Passerini said.

"We're going to give HP capabilities they didn't have, particularly in applications development," he said. "They're part of the HP go-to-market strategy."



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