IBM Global Services: billion dollar deals

French breakthrough

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IBM Global Services is to provide server, mainframe and storage systems and services to French insurance company AXA. France has proved a tricky market for foreign services providers, due partly to the strength of unions. This latest deal may prompt further French interest as it is structured to allow some of the jobs to stay in French hands.

IBM Global Services is continuing its recent run of billion-dollar outsourcing wins with a landmark $1 billion contract with French insurance giant AXA.

Under the terms of the deal, IBM GS will provide server, mainframe and storage systems and services to AXA over the next six years through its on-demand or utility computing model, which will enable AXA to pay for its IT systems services on a pay-per-usage basis. The contract will cover all of AXA's global operations including Western Europe, North America and Asia Pacific regions, and the company said it expects to save several hundred million dollars over the lifetime of the deal.

The latest deal comes hot on the heels of IBM GS's $2 billion 10-year contract with Visteon earlier this month, its $5 billion utility outsourcing contract with JP Morgan Chase at the start of 2003, and its $2.5 billion contract with Deutsche Bank in December.

The AXA contract is particularly significant since it is not structured as a typical outsourcing deal. IBM GS will not be purchasing either IT assets or personnel from AXA, which will retain ownership of the systems. AXA said this will enable it to retain its core IT competencies such as strategy, technology relationships, application development and database maintenance, as well as management of its technology portfolio.

IBM GS will be responsible for providing the computing skills, training and resources to deliver the on-demand IT services, and it will enable AXA to move from a fixed cost to a more flexible variable cost model.

France has been traditionally a difficult market to crack for the major US services providers, due in part to the strength of the local workers' unions that have strongly opposed the transfer of large numbers of employees to non-French companies. However, this latest deal by IBM GS, which does not require the sale of assets, and therefore secures certain IT jobs, could ignite interest in further deals.

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