While top software-as-a-service providers are experiencing record growth on the back of increasing cloud demand, more traditional players such as HP that are still in the process of adapting to the new way of delivering technology capabilities have been caught somewhat unprepared. That is now driving the hardware giant to expedite its transition with a massive restructuring of its services business.

Hewlett-Packard CEO Meg Whitman is aiming to achieve gross annual savings of up to $2 billion from the move, a plan that heralds the latest blow in the division’s long history of troubled operations, which dates back all the way to its merger with Electronic Data Systems in 2008. The company had to write off $8 billion on the acquisition and has laid off tens of thousands of employees since in an effort to recoup losses.

But HP Enterprise Services still posed a 16 percent revenue drop in the second quarter report published last week, which led Whitman to spill the beans about her restructuring plans during the earnings call. The executive promised shareholders that the cuts will help bring the division closer to achieving the internal 7-9 percent operating margin goal, although she didn’t specify exactly where the savings will come from.

But it doesn’t take a financial analyst to speculate about the source: more layoffs. The biggest causality will most likely be the outsourcing arm of the division, which has been rapidly losing its hosting business to cloud services in a trend that most recently saw sales plummet 25 percent in the second quarter.

With Whitman focusing her growth efforts on HP’s own infrastructure-as-a-service business, it’s even possible that the outsourcing group will be shuttered altogether and the resources directed elsewhere. That’s not particularly positive news for the remaining employees of the services division, who saw some 45,000 of their colleagues depart over the last two years.

Some former insiders have partially put the blame for the deterioration of the services business on the company’s leadership, suggesting that the layoffs themselves – and more specifically, the lost talent – lie behind its poor performance. But such cuts have proven to be a necessary evil in the cloud era, and they are hardly limited to HP; traditional giants such as IBM have also pursued similar restructuring initiatives as part of their own plans to refocus on services.

The slimmer and more efficient HP that will emerge from the plan should be better-equipped to address the changes in its competitive environment, but Whitman still has to prove she’s able to harness that potential. The company saw its total revenue slide 7 percent to $25.45 billion in the second quarter from the same period last year.

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