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Compaq leads £25m Regus office deal

Arlene Martin
Regus, the serviced office space provider, is to outsource its entire IT infrastructure and support in a bid to reduce its core costs by 40%.

The company, which has operations in 50 countries, has signed a £25m deal with Compaq, Colt Telecom and software manufacturer Cedar Group.

"This outsourcing deal means that we double our service levels while reducing costs by almost 40%," said Mark Dixon, Regus chief executive officer.

Charles Homs, a senior analyst with Forrester Research, told CW360.com: "It sounds reasonable that Regus should stick to its core competency, which is delivering serviced office space. Outsourcing its tenants' IT makes sense because IT suppliers can do a better job than it could."

The move could signal the company's desire to offer tenants a more comprehensive serviced office solution. "For example, start-ups and smaller companies could think about outsourcing their HR or their CRM to Regus," said Homs.

But Steve Barrie, a chief analyst with IT information group Bloor Research, was sceptical that Regus would be able to reduce its costs by almost half without its service being affected. "It is almost unheard of for an outsourcing deal to produce that kind of benefit unless you were doing something horribly wrong in the first place," he said.

A spokesman for Regus denied that the company had been delivering an inferior service to its tenants, and said that the outsourcing was driven by growth. "During the last 12 years, we have been growing at 9% compound a year," he said. "Our rapid growth has meant that our IT systems globally would benefit from synergies, rationalisation and consolidation.

"We believe that working with this arrangement, with Compaq in the lead, will allow us to rationalise and consolidate on a global basis while cutting costs. We can provide a better quality service to our clients, managed by one supplier."

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