The per-user agreement covers Electrolux's disparate local area network and European desktop environments, built up following a series of acquisitions.
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IBM will provide support, helpdesk services, administration and Lotus Notes software. Electrolux will pay according to the number of PCs supported, which is estimated at anything between the existing 13,000 and up to 19,000 as the company develops over the seven-year term.
“We like to have flexibility and this deal will provide,” said Art Cox, vice president of group IT staff for Electrolux. Cox declined to discuss the size of the deal, which is thought to be worth around $250m, but said the firm expected to see a return on investment by the end of the seven-year term.
Electrolux has standardised on Microsoft Windows 2000 and Lotus Notes but still has “a pretty broad range” of desktop hardware and software.
“A lot of our business has been through acquisition and divestments,” Cox explained. The deal should enable it to cut costs by standardising on IBM machines and implementing consistent software across Europe.
Companies like IBM claim on demand computing is more flexible and saves customers money by allowing them to pay only for the actual amount of users they have.
Jamie Snowdon, research director at analyst firm IDC, said the deal makes sense for Electrolux as it offers both flexibility and standardisation.
“This will give Electrolux a good way of doing multiple plans - they don’t have to commit themselves,” said Snowdon. “I expect to see more deals like this this year, especially with HP and IBM. It will end up with IT becoming a commodity and that’s good for the customer.“
The choice of IBM was “not much of a surprise” as the two firms have a longstanding relationship, Snowdon added.
However, he questioned just how flexible the deal was. “It would be interesting to see what ‘on demand’ means in this deal and just how flexible it is. In the deals we’ve seen so far the actual variability has been quite limited. We’re still a long way from the true idea of computing as a utility,” Snowdon said.
IBM global client executive Mike Fletcher said the deal was much more closer to a true on-demand, variable cost deal than previous contracts signed with customers such as JP Morgan and Deutsche Bank.
“There are no fixed charges,” said Fletcher. If Electrolux closes an office of 100 people they would pay for 100 fewer users. That’s pretty variable. This is getting much closer to what is meant by on-demand computing.”
More than one hundred Electrolux IT employees will transfer to IBM in the deal, which is due to take effect on 1 August.