IBM takes over ABB’s IT operations for $1.1bn

29 July 2003 Engineering giant Asea Brown Boveri (ABB) is outsourcing its IT infrastructure operations to IBM in a 10 year deal valued at $1.1 billion.

The Swiss-based company says that it will hand over almost 90% of its IT operations to IBM ‘s Global Services division, transferring more than 1,200 employees in the process.

As with other outsourcing mega-deals, cost cutting is the overriding factor. “This long-term deal allows us to significantly take down costs,” said Peter Voser, ABB’s chief financial officer. IBM suggests that its ‘On Demand’ usage-based pricing model will cut at least $50 million from ABB’s IT costs over the 10 years.

The $1.1 billion deal is in addition to a $600 million pilot contract signed in the fourth quarter of 2001 that covered ABB’s Sweden and India IT operations.

Under the extended programme, IBM will assume responsibility for the operation and support of ABB’s IT in 14 countries across Europe and North America, taking over the management of servers, operating systems, corporate networks, PCs and helpdesks.

ABB will retain a small team of senior IT staff to oversee and coordinate the IBM relationship.

Against stiff competition from rivals such as EDS, CSC and Accenture, IBM has won the majority of outsourcing mega-deals — contracts worth more than $1 billion — during the past 18 months. These include deals with insurance group AXA and banking giants JP Morgan Chase and Deutsche Bank.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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