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Transformation project reportedly hits trouble.

HP Australia is reported to be cutting back on the numbers of contractors working on its IT outsourcing transformation project.

The Australian newspaper reported about 180 contractors in Melbourne and Sydney could be affected, citing undisclosed sources and the text of an email sent to staff this week.

A spokeswoman for the vendor declined to comment on "speculation or operational matters."

"It is part of normal business practice to review and align resources in line with business priorities," she said.

HP announced the overhaul of its enterprise services business in June 2010. It planned to consolidate "data centres, management platforms, networks, tools and applications to create a more scalable, modernised and automated IT infrastructure [to] better serve clients' needs."

The project was expected to cost $US1 billion over multiple years while bringing "net savings after reinvestment" of up to $700 million a year, the company said at the time.

In Asia Pacific, the project was divided into three major streams - data centre consolidation, software and tools, and delivery model and organisation.

The data centre consolidation stream encompassed a major new facility in Western Sydney, worth at least $119 million.

HP Australia's spokeswoman said construction of that facility had been completed on schedule.

"Construction was completed the end of 2011 and will be followed by a period of systems migration and testing to ensure the best levels of service for our clients," she said.

The spokeswoman declined to reveal how any of the three major project streams would be affected by the reported cuts.

The Australian reported that the transformation project was being weighed down by contract labour costs.