IBM Tallies $575M On-Demand Deal

In a ringing endorsement of its on-demand computing strategy, IBM on Tuesday said it padded an existing IT services agreement with Morgan Stanley to include a utility computing package for $575 million over five years.

Big Blue will build technology infrastructure for the financial services giant that draws computing power as needed from a pool of data center resources.

Morgan Stanley’s wants to automate its Individual Investor Group and Discover Financial Services and asked IBM to set up a system in which the company will pay for the back-end computing power it uses.

This usage concept, made increasingly popular by IBM, HP , VERITAS Software and others, is similar to the way consumers pay for water and electricity.

Though Armonk, N.Y.’s IBM had an existing services pact — an IT outsourcing agreement that reaches back to 1999 — the deal is a still somewhat of a coup because it ensures that IBM is the driver behind Morgan Stanley’s technology, something rivals such as HP or VERITAS can’t claim.

Under the terms of the deal, IBM will also provide help desk and desk side support as a managed service to some 20,000 users in Morgan Stanley’s Individual Investor Group.

Specifically, IBM will help shift Morgan Stanley’s Individual Investor Group’s mainframe to a shared infrastructure at an IBM on demand data center. IBM will provide such resources as processing power, storage capacity and networking bandwidth on the fly, to be scaled up or scaled down depending on usage requirements.

Par for the course in utility computing environments, IBM is offering variable pricing via a metering system.

The contract is not the first such on-demand pact, according to IBM spokesman James Sciales. IBM inked a $600 million deal with ING U.S. Financial Services in December, a $254 million agreement with John Hancock Financial Services in September and an $800 million pact with Equifax last August.

Sciales said the Morgan Stanley deal is different in that it is a shared infrastructure, meaning the company will share actual processing power, storage, bandwidth with other IBM customers through the on-demand center.

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