CSC, EDS Notch New IT Contracts

By Craig McGuire

Major IT outsourcing contracts are showing no signs of letting up as the final quarter in a busy year for outsourcing contracts draws to a close.

Two top providers of IT outsourcing services, Computer Sciences Corp. and Electronic Data Systems Corp. , have announced major deals, worth over $1 billion and $300 million respectively.

The deals come as major players in the IT services realm scramble to compete for a 10-year, $7 billion contract to integrate and maintain computer systems for England’s Ministry of Defense (MoD).

CSC’s contract is with SAS AB, Scandinavia’s largest listed airline and travel group, which said tapped the El Segundo, Calif.-based outsourcer to provide an extensive array of outsourced IT services.

The five-year deal — which CSC estimates could be worth $1.5 billion if SAS exercises a two-year option and two additional one-year options — calls for CSC to provide IT consulting, systems integration, application development and maintenance, and IT infrastructure services for mission-critical SAS business needs.

This includes booking and ticket reservation systems, ticket-free travel technologies, self-service check-in, flight maintenance and cargo control systems.

SAS AB offers air transportation and airline related services from its base in Northern Europe. Scandinavian Airlines flies within Scandinavia, as well as to and from Europe, North America and Asia.

As part of the transaction, CSC will acquire Scandinavian IT Group (SIG), a subsidiary of SAS Group with 1,200 employees providing IT solutions to the international airline industry.

Pending regulatory reviews and approvals, the acquisition will be completed January 30, 2004, and the outsourcing agreement will become effective February 1, 2004.

With improving economic conditions reported throughout U.S. and European markets this year, IT budgets are loosening somewhat, but not nearly to the heights of the late 1990s. As a result, IT outsourcing is increasingly viewed by IT decision-makers as a viable alternative to investing in large IT expenditures to outfit their enterprises.

IT outsourcing juggernauts EDS, IBM and CSC know this all too well.

For CSC, the $1.5 billion contract gives the company a toehold in Star Alliance, as Scandinavian Airlines is a founding member of the world’s largest global airline alliance. Other airlines in the Group are Spanair, Braathens, Wideroe’s Flyveselskap and Blue1.

For its part, EDS has notched a 10-year, $320 million IT outsource contract renewal with Blue Cross Blue Shield of Massachusetts (BCBSMA). The project is aimed at lowering the costs of BCBSMA’s computing capabilities and implement its future operating system.

As part of that deal, EDS announced it will implement its MetaVance Administration and Finance System for BCBSMA. MetaVance is an integrated, scalable enterprise system that allows healthcare organizations to administer benefit programs across multiple companies, lines of business and products.

Additionally, EDS will continue to provide a number of key services to BCBSMA, including Web hosting, desktop, mainframe, mid-range, WAN network management, Middleware and integration support.

The contract extends EDS’ previous seven-year contract with the company and becomes effective in January 2004 and comes as the Plano, Texas outsourcing company regroups after being passed over for a renewal of a 10-year IT outsourcing contract with England’s Inland Revenue division. The contract, worth just over $5 billion, was awarded instead to Cap Gemini Ernst & Young.

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