When General Motors Co. decided to have most of its information technology work in-house, an IT service deal valued at about $600 million annually to Hewlett Packard Co. became threatened, according to a Reuters report that cited insiders. The extent of the impact on the HP agreement can’t be determined yet.
However, the GM contract is one of the largest contracts at the IT firm, explaining that the loss of a major amount of that business would be a "big deal." The sources asked not to be identified since the arrangement details are private. GM, a major client of HP, has offered technology services and has supported GM for 25 years.
GM has said recently that it intends to manage most of its own IT needs internally, completing the transition within 3-5 years by employing thousands of software developers and finding replacements for its outsourced work. In July 2010, HP announced that it had gotten a multi-year, $2 billion services deal with the carmaker, which has outsourced about 90% of its IT requirements. GM's technology infrastructure is now managed by the top PC maker in the world.
These include applications development and management services for product development, manufacturing, business services, and supply chain. The source said that GM's automotive division alone makes up about $350 million annually in the IT services business for HP, stating that HP sells majority of its products and other related services to GM.
The $600 million figure attached to this deal excludes the part related to HP's work with the company. In addition, GM outsources the technology-related work in its OnStar division, an agreement that’s separate from the IT services deal the two were able to enter. Onstar is the in-car navigation and communications system of GM.