IBM lands $1.1 billion IT services deal

CNS News ^ | July 28, 2003, 3:04 PM PT | Ed Frauenhiem

[softengine]

IBM has inked a $1.1 billion, 10-year information technology services contract with ABB, a Swiss power and automation technologies company.

IBM Global Services will take responsibility for the operation and support of ABB's information systems infrastructure in 14 countries in Europe and North America, representing some 90 percent of ABB's information systems infrastructure. Under the deal, announced Monday, IBM will take over the management of ABB servers, operating systems, corporate networks, personal computers and help desks.

The deal builds on two pilot contracts between the two companies signed in 2001 worth about $600 million.

"This long-term deal allows us to significantly take down costs while benefiting from IBM's global expertise," said Peter Voser, ABB's chief financial officer. "It benefits both ABB and IBM."

ABB expects IBM's "on demand" IT system--which involves pricing that varies according to usage--to save it at least $50 million per year over the 10-year period, according to Big Blue.

About 780 ABB employees will transfer to IBM under the agreement. Another 510 ABB workers already have shifted to IBM under the pilot contracts.

The new ABB contract emphasizes IBM's strength in landing IT infrastructure outsourcing deals worth a billion dollars or more. IBM garnered most of these megadeals in 2002, according to research firm Gartner Dataquest. IBM won seven of the blockbuster deals in 2002 and shared an eighth deal with software services provider Keane, Gartner said. For the year, there were at least 14 megadeals worth a total of $28.4 billion compared with nine megadeals in 2001 worth a total of $15.1 billion, Gartner said.

IBM appears to be on a roll this quarter when it comes to IT services wins. During a July 16 conference call, IBM Chief Financial Officer John Joyce said that "both Qwest and the state of California just signed. We're off to a very good start in the third quarter, with multiple deals totaling almost $3 billion." That total did not include the ABB deal, according to an IBM representative. In the second quarter of this year, IBM's total signings for services, including strategic outsourcing, were $10.7 billion.

Outsourcing contracts, which involve a business farming out control of tech duties, such as applications development, or business tasks such as accounting and finance, have been a bright spot for IT services providers. According to TPI, a firm that advises companies on outsourcing contracts, the total value of large outsourcing deals (those worth more than $200 million) rose from roughly $46 billion in 2001 to about $50 billion in 2002.

TPI, however, has predicted the outsourcing market will cool off this year. The total value of large outsourcing contracts should drop by 10 percent to 20 percent in 2003, according to the firm.

Other companies competing for IT services contracts include Hewlett-Packard, Electronic Data Systems and Accenture.

[softengine]

Go Blue.

[softengine]

Blue bump.

[JRandomFreeper]

The same stuff doesn't get done on time, or in budget, only now it's almost impossible to figure out who to blame. That's why I'm now.....

[Fifth Business]

Kudos, IBM!

[oceanview]

and those employees who "transfer" to IBM will be replaced by workers in India within 2 years. In fact, that is the only purpose and real objective of the companies signing these contracts, they bring in IBM to do their offshoring dirty work.

[lelio]

Outsourcing to IBM to save money? Did I just wake up in bizarro world?

[Blueflag]

My. Aren't we the cynic.

Commodity goods are commodity goods, even when it's labor.

If they can meet the service levels at a lower cost, why not let capitalism work?

I've survived 6 involuntary jobs changes. These folks can too.

[oceanview]

initially it costs more, but when the offshoring kicks in, that's where the real payoff is.

[Sunnyvale CA Eng.]

initially it costs more, but when the offshoring kicks in, that's where the real payoff is.

Yea, payoff - bonus time for the VP's that made the decision to $hitcan the Americans - especially those bastards with lots of experience, they just earn too much, right?

[Huck]

If they can meet the service levels at a lower cost, why not let capitalism work?

Oh boy, are you gonna get it.

[jla]

fyi

[oceanview]

I agree. don't take my post the wrong way, it was just an observation, I also think it stinks to high heaven.

[Pukin Dog]

It wont even cost more initially.

ABB saves 150% on getting rid of the employees, and the employee payroll costs; taxes, insurance, health, and so on. And true, 90% of these folks going to IBM will be out of work within 18 months. Information Technology in America is a dead career path.

[ItisaReligionofPeace]

If I run a business I want the best employees at the lowest price. In the long run this is the only way to go. If the executives don't do this, they won't have a company to run in a few years.

[battousai]

Good job IBM,

At the same time here we go again with the offshore bad stuff, please explain to me how exactly IBM will go offshore anyway? They are a global company they have branches in nearly every nation on the planet, and they have employees, mostly locals, at those branches... so by your definition if a PRIVATE company decides to use its OWN employees, say for example its programmers in India, to do work as they see fit this is somehow amoral?

Why not have the state take over IBM and dictate that unionised American workers with their ridiculous rules should work there. The big bucks IT job market burst along with the overhyped .com bubble, people need to get over this and come back to reality. There are still IT jobs in the US, just not for those people who suddenly wanted to jump onto the IT gravey train and came out in droves from all those "IT diploma" colleges, and now somehow expect to get the same high paying jobs that were arround when they first went in.

You cannot take away jobs that don't exist, find me an American programmer who will work for what an Indian one will? Its just good business sense buy low sell high.

As someone posted above let capitalism and the free market work, why are you guys sounding like those hippies who protest at every WTO meeting. trade is good for all concerned whether it be trade in goods or labour.

American workers will just have to adapt and move on to other types of work. The IT service industry is always doing well, as I can tell from collegues who run their own consulting businesses, so there is no lack of demand for IT work.

just my take on this whole offshore thing.

[oceanview]

then incorporate in India. IBM should be incrementally stripped of US patent protection as they offshore more and more jobs.

[vin-one]

been there doing that currently, but so far I have lasted over four years
others in my 5k group have not been so lucky.

[oceanview]

lets try and make it simple:

100 Americans working for the company are fired, and an office building is constructed in India, and 100 Indians are hired and given those exact same jobs.

next time you go for an XRAY, it will likely be read in India, and the Americans medical tech who had the job was fired to make that possible.

IBM is not EXPANDING into India, it is TRANSFERRING Americans jobs there.

[lelio]

As someone posted above let capitalism and the free market work, why are you guys sounding like those hippies who protest at every WTO meeting. trade is good for all concerned whether it be trade in goods or labour.

So trade with a communist country like China is good for everyone? What makes you think that they money sent over there isn't going straight into a nuclear weapon pointed at us?
Granted that's an extreme example, but I don't buy that unfettered trade with anyone is a good thing.

[oceanview]

where are your colleagues, in India? LOL....