IBM in $4 Billion IT Contract with Amex

By Erin Joyce

In one of its biggest services contracts to date, International Business Machines has signed a $4 billion, seven year deal with American Express to help manage its IT infrastructure on an as-needed basis.

Big Blue spokesperson Nancy Kaplan said the arrangement with Amex is among IBM's largest ever global services contracts.

"They're hiring us to perform their IT services and manage their IT infrastructure for them. It's on demand services (Amex) can use as a utility," she said.

American Express is among IBM's top five clients. The deal is an example of the move by the tech giants of the world to offer major enterprise customers computing services as their needs grow or shrink. IBM has also made a major commitment to a coming era of grid computing services that dole out a range of distributed computing power as the client's needs surge.

But for now, the contract is a reflection of the growing interest in outsourcing IT operations as a way to trim operating costs.

The agreement is expected to save Amex hundreds of millions in information technology expenses over the life of the contract, which also calls for sending about 2,000 Amex employees to comparable positions within IBM. Amex said the contract resulted in the elimination of about 20 Amex technology positions.

"This is a unique deal in that IBM is executing the day-to-day management of the IT network while we are maintaining a strategic role overseeing that," said American Express spoksesperson Molly Faust.

"What's important is that this provides us one of the keys to flexibility, as part of (Amex's) company-wide effort to develop more models that support growth," especially within the financial services giant's credit card business lines.

Tech research firm Gartner Inc. has predicted that the North American IT outsourcing market will grow from $101 billion last year to nearly $160 billion by 2005.