On the one-year anniversary of its merger with Compaq, Hewlett-Packard ( HPQ) took a moment to crow about its recent string of services wins. The deals, including a just-finalized $3 billion, 10-year contract to manage Procter & Gamble's ( PG) technology, fit with H-P's strategy to boost its services and software lines relative to slower-growing hardware.

To be sure, H-P's services arm needs to do some hustling, given rival IBM's ( IBM) decade-long head start and revenue base of more than three times H-P's size.

But the P&G contract at least shows H-P can play in the big leagues, with the company having largely quashed initial worries that its integration with Compaq would turn messy. A year after the merger, investors and analysts give H-P credit for making some progress in services -- an area that's strategically vital, with the hardware business now mired in permanent slow-growth mode.

To put the growth potential in perspective, consider technology outsourcing, a service market that's forecast to grow at a relatively impressive 10% to 15% a year. That's as much as double the rate of H-P overall, which CEO Carly Fiorina has forecast to grow at a long-term rate of around 7% to 9%.

Not only is services expected to grow faster than computers, but the area also offers a welcome measure of sales stability, generating steady revenues over the life of a typical three-to-five-year contract.

"H-P is pretty new at services, but we think it's pretty important, given the size of the company, that they move in this direction. It's absolutely the right long-term move," says John Rutledge, manager of the ( ETCAX) Evergreen Technology fund, which has 6.7% of its assets in the stock.

Granted, reaction to the high-profile P&G deal itself was mixed. "P&G has a history of demanding irrational terms, so H-P might have taken big risks -- some of which H-P might not recognize given its lack of experience -- in order to establish a beachhead in outsourcing," wrote Merrill Lynch analyst Steve Milunovich in a recent note.

"I hope the P&G contract is executed profitably," says Rutledge.