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The deal builds on an existing relationship with IBM from 1998 when the building society outsourced its datacentre, desktop and helpdesk in a deal valued at more than £100m over 10 years.
Under the new agreement, IBM will run desktops, servers, helpdesks and applications for Bradford & Bingley's mortgage processing division and its online mortgage broker business, Charcol Online.
Bradford & Bingley will only pay for the IT resources it uses under IBM's on-demand charging method. Neither company would put a value on the extended contract.
Richard Holway, director of analyst firm Ovum Holway, said on-demand computing helps organ-isations reduce fixed costs and could offer significant savings.
In February, Bradford and Bingley signed a £140m, 10-year deal with BT to deliver a portfolio of managed voice and data services to its 7,500 employees.