Qantas Opts to Outsource

As Qantasbecomes the latest firm to announce a massive outsourcing deal, data center managers warn that companies should be prepared to do some serious thinking if they want to reap the benefits of outsourcing.

Today, Qantas awarded IBM Corp. (NYSE: IBM)a $448 million deal to manage the airlines data center and technology infrastructure. The ten-year agreement comes on the back of similar deals between IBM and firms such as Morgan Stanley and Michelin.

And these are not the only firms cutting this type of deal. Earlier this month Hewlett-Packard Co. (NYSE: HPQ)and BT Group plc (NYSE: BTY; London: BTA) signed a $1.5 billion deal, which will see HP manage the telecom firm’s midrange server and desktop IT infrastructure within the U.K.

Although precise details on what the IBM/Qantas contract involves are still being kept under wraps, a key element in the ten-year deal is the migration of Qantas’s servers to an IBM data center in Sydney. However, a spokesman for IBM did confirm that some 320 of the airline’s 400 midrange servers will be moved from Unix to Linux as part of the migration.

Consolidation of servers to a managed data center is becoming increasingly attractive to enterprises striving to keep their IT overheads low. Last month, for example, Daimler-Chrysler announced a multiyear agreement with Electronic Data Systems Corp. (EDS), which involves the migration and consolidation of the automotive firm’s servers.John Varney, chief technology officer at the British Broadcasting Corp (BBC), warns that outsourcing deals involve much more than just technology. “The biggest challenge is undoubtedly keeping the business going while you make the change: You need a transition program and should make sure that everyone in your organization buys into it.”

The BBC, in fact, is planning to migrate 800 servers to data centers as part of the corporation’s own $3.6 billion outsourcing strategy (see BBC Drifting Toward Data Centers).

Leonard Eckhaus, chairman of the data center users’ association Afcom, concurs. “There has to be buy-in at all levels, especially with the end-user community.”

Qantas is taking a two-pronged approach to the outsourcing deal. First, IBM will migrate Qantas’s servers to a shared infrastructure at one of the hardware giant’s data centers. Second, IBM Global Services will manage a range of services, including security and change management, across Qantas’s other IT service providers.

But you also need to make sure that there is good communication in a deal of this scale, according to Eckhaus. “There have to be reporting mechanisms that work and that everybody understands.”Gary Yeck, director of the technology strategies practice at analyst firm Meta Group Inc. agrees. “If you strike up an outsourcing deal, you have got to monitor that engagement. the biggest part of an outsourcing deal is monitoring that contract.”

The IBM spokesman said that the vendor will be drawing on its “wealth of experience” in major outsourcing projects, citing similar deals with Air Canada and Finnair.

Qantas is also looking to exploit on-demand computing as part of its deal with IBM. On-demand computing enables a company to pay only for the processing power or storage resources they use, as opposed to the overall capacity of the servers and storage they are using.

This is not the first time that Qantas and IBM have cosied up -- the two companies go back a long way. Back in the 60s, for example, Qantas was among the first firms in Australia to use the IBM System/360, the world’s first mainframe.

Despite all the hurdles, Eckhaus believes that outsourcing can still be successfully achieved: “If you are careful and understand what your future needs will be, it can be a very good thing.”Qantas was unavailable for comment.

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