IBM Inks $2 Billion Outsourcing Deal with NTL

With all of Big Blue’s efforts to promote its new servers and microprocessors, its easy for industry watchers to forget that IBM Corp.
boasts a significant outsourcing outfit.


IBM Corp. reminded the business world Thursday that it owns a Global Service
Division (GSD) when it penned a deal to provide technology for NTL Inc., a
major UK broadband communications company. Effective immediately, 483 IT
staff will transfer from NTL to IBM to coincide with the birth of the
service, for which IBM will lend its IT services for NTL’s operations in the
U.K. and Ireland through 2012.


After putting their heads together, the firms created a menu-based approach
to all services to be rendered, with competitive prices. NTL, who competes
with giant British Telecommunications plc., hopes the contract will cleave
$450 million from its expenses over the life of the agreement.


Stephen Carter, managing director of NTL UK and Ireland, Thursday issued the
increasingly popular mantra that “the contract frees the company from
day-to-day IT demands so that we can focus on delivering great service and
innovative communications solutions for our customers…”


And so it goes with the majority of outsourcing deals, which lends credence
to IDC Corp.’s research about the snowballing state of outsourcing,
particularly in the U.K.


IDC’s analysis of the top 100 outsourcing deals in 2000 reveals contract
expenditures reached almost $56 billion. The contracts ranged from $58
million to $7.5 billion, with the highest number of deals falling between
$100 million and $249 million.


“IS outsourcing engagements typically dominate the list of the largest
deals. Moving forward, a growing number of outsourcing contracts –
specifically those with the highest values and broadest range of services –
will encompass BPO and Internet-related services,” said Cynthia Doyle,
program manager of IDC’s IT and Offshore Outsourcing Strategies research.


Doyle went on to project that as the economy goes more global, firms will
rely more heavily on top technology contenders for help. IDC also noted that seventeen “megadeals” (those over $1 billion) were signed, an almost 50 percent increase over those signed in 1999.


With Thursday’s deal, IBM and NTL could help the U.K. outsourcing sector on its way to beating 2000’s record posting of 17 $1-billion-plus contracts.


NTL will use IBM’s help to service its growing footprint in the U.K.,
Ireland, Switzerland, France, Germany and
Sweden, where NTL and its affiliates serve more than 8.4 million
residential cable telephony and Internet customers, including approximately
1.5 million off-net Internet and telephony customers, in addition to 76,000
business clients, including Royal Bank of Scotland, Comet and AT&T and
Orange.


The deal is another billion deal for Big Blue, which on Monday of this week
inked a similar technology provision deal with European carmaker Fiat. Under
that play, IBM Global, IBM Italy, and Fiat’s business services arm will
manage Fiat’s computer systems, as well as develop and upgrade software
being used at the company. The project is estimated to be good for 7 to 10
years and is valued at $5 to 7 billion.


And, like many of its tech-driven brethren, IBM has sought to bolster its
large Global Service Division when the opportunity presents itself. In
April, Big Blue scooped up
e-consultant Mainspring for $80 million in stock. The GSD boasts 150,000
professionals, which took care of customers to a revenue tune of more than
$33 billion in 2000.

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