It is no secret that corporations are turning their attention from traditional in-house software packages to more agile services delivered over the Internet.

But how they are making this transformation is less well known. Executives at Hewlett-Packard say they see four keys steps and major benefits when the change is completed – including at H-P itself.

With digital data doubling every 18 months and data overall doubling every five years, managing the information flow is becoming one of the modern corporation’s biggest challenges. Data is not only expensive to handle, but its careful use can lead to new revenue streams.

It seems clear the enterprise market is moving to services, said CEO Mark Hurd (pictured) on a Monday conference call discussing his company’s acquisition of EDS. (H-P announced it would cut 24,600 jobs over three years in the integration of the firms.) To get there, they will need to modernize their data centers by consolidating facilities and adopting standards-based servers and technology.

Enterprises will need to adopt virtualization to better utilize computers and storage (a market that also is ready for a disruption). And they need to transfer spending from maintaining equipment to innovating new ways to use technology – something services can help accomplish. Companies can spend 75 percent of their tech budgets on operations, not innovation, said Executive Vice President Ann Livermore.

H-P is beginning to show the benefits of its own transformation. In 2005 before kicking off a plan to cut its operations to six data centers and straighten out a spaghetti bowl of disparate systems, H-P had more people working in IT than selling to customers, Livermore said. Now it has twice as many people serving customers.

By Mark Boslet, Editor at Large.