The Big Score

Dan Talbott got the call on Christmas Eve. He was at his home in Plano, Texas, and was just sitting down to dinner with his wife and four kids when his cell phone rang. It was his boss, Mark Townsell, who heads business development in North and South America for Hewlett-Packard's computer-services division. Townsell got straight to the point: Procter & Gamble had decided to choose a blue-chip tech company to run its worldwide computer systems and data centers.

The first hurdle would come in just three weeks, when a team of P&G executives would travel to HP's Palo Alto headquarters for a make-or-break series of meetings. They would decide whether HP had enough talent and experience even to bid on the contract, let alone win it.

For Hewlett-Packard, the stakes couldn't have been higher. A big part of the rationale for the company's controversial acquisition of Compaq Computer was that it would catapult HP into the comparatively fast-growing computer-services business, one segment of the IT industry in which HP was decidedly a tier-two player. A brawnier Hewlett-Packard could compete for long-lasting, highly profitable contracts with giant customers like Procter & Gamble -- which in turn would help drive sales in HP's struggling personal-computer and server divisions. HP's dynamic chief executive, Carly Fiorina, had staked her career -- and the company's future -- on the takeover, and the deal's many critics were already declaring it a failure. Now -- six months after the Compaq acquisition was booked -- it was time to start showing results.

Procter & Gamble, the world's largest consumer-products company, would make for a rich prize. The $40 billion juggernaut markets 300 brands -- Bounty, Charmin, Clairol, Crest, Pampers, and Tide among them -- to some 5 billion consumers in more than 160 countries. Winning the contract to run P&G's IT infrastructure -- its central nervous system -- would give HP a critical beachhead in its battle against the industry's top guns, Electronic Data Systems and IBM. None of that was lost on Talbott. But even as he was taking in Townsell's pitch, Talbott was thinking about other, more immediate concerns.

A few inches over 6 feet and more than a few pounds over 200, Talbott is a Texas dynamo who seems to live on hot dogs and 18-hour workdays. He bears the pasty complexion of a man who has spent most of his working life in airports and conference rooms, and indeed, he has -- he's racked up 3 million miles on American Airlines alone. But while he's an IT-services-industry veteran who put in 23 years at EDS and 4 years at IBM, he's a rookie at HP. At the time of Townsell's call, he'd been with the Silicon Valley company for all of one month. He thrilled to the thought of battling for the P&G contract; accepting Townsell's challenge was a no-brainer. But he was still finding his way around the 141,000- person company, which boasts operations in 160 countries. He would have to bring all of HP's assets to the bargaining table. Could he accurately reflect HP's true capabilities?

Talbott bet that his alma maters EDS and IBM would join the fight for P&G and that both would bring on their A+ teams. Just a few months earlier, EDS was on the verge of signing an enormous, $8 billion contract to take over all of Procter's back-office operations, when P&G scuttled the deal at the eleventh hour. There was little doubt that a bruised and hungry EDS would be back in the hunt for this new, revised deal. IBM would be there too -- eager to grab another big chunk of market share. In going head-to-head with the industry's two giants, HP would compete for its very legitimacy. Talbott didn't need to be told: This was a must win.

After thanking Townsell for his confidence, Talbott hung up and announced to his family that P&G was in play. "You won't be seeing me for a while," he told his wife. And then, using the dealmaker's lingo for joining battle, he broke the news: "I'm going to engage." She didn't need a translation. She'd heard it before.

The $8 Billion Deal That Got Away

Procter & Gamble's headquarters is topped by a pair of nearly conical, 16-story towers -- dubbed the "Dolly Parton" for obvious anatomical reasons -- that protrude over downtown Cincinnati. While P&G's lifetime spans three centuries, it's a relentlessly forward-looking organization -- a 166-year-old former soap and candle maker that is now extraordinarily technocentric. It's not unusual to lift the lid on a multinational company and find a farrago of incompatible software applications and systems. As recently as the late 1990s, EDS -- to take one not-so-random example -- was tangled up in 16 different email systems. P&G is an exception. Thanks to heavy investment in information technology, its activities are standardized, seamless, and deeply twined, in all 86 countries in which it operates. It uses its IT systems to gain competitive advantage and to focus on its core challenge: to make, pack, and ship billions of items a year. From 1999 to 2002, P&G estimates that it slashed $500 million by standardizing and globalizing its back-office operations. But by the company's own reckoning, that wasn't good enough.