IBM Wins $1.5 billion Deal With UK

IBM Corp. (NYSE: IBM)has won another major outsourcing contract, securing a massive deal with the U.K. governments Department for Environment, Food and Rural Affairs (DEFRA).

Although the financial details have not yet been released, the deal is likely to run for between 10 and 17 years and is expected to be worth between US$1.5 billion and $2.5 billion.

Initially, three bidders -- Accenture, Cap Gemini Ernst & Young, and IBM -- had been on the shortlist for the contract when it was announced last year, although IBM and Cap Gemini were left to slug it out in the final stages.

Officials at DEFRA said the bidding process between the two companies had been "extremely competitive" but refused to add any further details. A statement released by the Department yesterday highlighted IBM's "skills and experience" in this area, suggesting that the hardware firm had drawn on its strong outsourcing background during the bidding process.

The DEFRA deal dwarfs the $448 million contract that IBM signed last week to manage the data center and IT infrastructure of Australian airline Qantas (see Qantas Opts to Outsource).Although both DEFRA and IBM are staying tight-lipped on the precise details of what the deal will involve, there has been speculation that the contract will see IBM rolling out data centers to support DEFRA’s operation.

A key element of DEFRA’s planned IT overhaul is the creation of separate data repositories on land, livestock, and customers -- three of its main areas of responsibility [ed. note: don't wanna get livestock and customers confused!].

Among a range of contracts with governments around the world, IBM has built data repositories and warehouses for organizations such as Wisconsin's Crime Information Bureau and the Ohio Bureau of Worker's Compensation.

Simon Moores, managing director of U.K. firm Zentelligence (Research) Ltd., believes that IBM is likely to host DEFRA's data repositories in its own data centers. “IBM is increasingly trying to sell its own data centers into government, so it wouldn’t surprise me," he says. "The benefits for DEFRA would be improved efficiency and a reduction in cost if they had these facilities on hand from IBM."

The outsourcing project certainly promises to be a major undertaking. DEFRA currently employs around 600 servers, which include NT/Windows 2000 machines as well as Unix application and SAN servers.On the networking side, the department’s WAN is based on TCP/IP interconnects and covers around 150 sites. DEFRA also employs a number of LANs based on Ethernet and TCP/IP protocols.

But DEFRA will have to buck the U.K. trend of high-profile public sector IT disasters, if it is to succeed in its outsourcing scheme. The U.K. government has a poor track record when it comes to major technology implementations: Its Child Support Agency and Inland Revenue department, for example, have both hit the headlines over recent years thanks to IT problems.

Such is the extent of the government’s difficulty implementing major technology projects that Moores estimates that only 34 percent of its IT projects have actually been successful. “Government and technology aren’t easy bedfellows,” he observes.

— James Rogers, Site Editor, Next-gen Data Center Forum