Reportedly, Hewlett-Packard (HPQ) or H-P will be providing data-center services to the U.S. Department for Health and Human Services (HHS). H-P will be replacing Terremark, a subsidiary of Verizon (VZ), which was providing the Web-hosting services to HHS.

The decision to discontinue Verizon’s services was primarily due to the disruptions in the Terremark data centers in October as a result of which the website and its allied services crashed temporarily. HHS has reportedly not renewed the Terremark contract which is at the ending phase.

H-P already serves as the fiscal agent or the IT provider to 19 other states’ Medicaid programs. The need for an efficient Medicaid program arises from the enactment of the U.S. Healthcare Reforms Bill which aims to make healthcare more affordable.

H-P’s services help the states to improve Medicaid programs, deliver more critical health information to a larger number of healthcare providers and keep pace with the nationwide healthcare reforms in a cost effective manner.

As the data center services provider, H-P will now be able to cater to the needs in a more comprehensive manner. H-P with its vast number of data centers and allied services is expected to efficiently manage the grand scale of the Obamacare program.

Nonetheless, H-P has to compete with Computer Sciences Corp. (CSC) in the Medicaid service space. H-P’s growing focus on new business segments, such as electronic medical records, cloud computing and the recently-added analytics segment will help the company grow in the ensuing quarters.

However, the company is still reeling under pressure from the declining PC business and a sluggish macroeconomic environment. Competition from other technology bellwethers such as International Business Machines Corp. (IBM) and Salesforce.com makes it even more difficult for the company to gain market share in the cloud and security space.

Currently, H-P has a Zacks Rank #3 (Hold).

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