"We want to be very competitive in e-business and want to have more resources for innovation. IT isn't our core business and we want to release capital for the core business," said Eero Ahola, Finnair's senior vice-president of corporate business development and strategy.
"E-business for us is radically important because it gives you cost benefits and a competitive advantage," he said.
The technology centre will act as an incubator for new e-business systems, which Finnair hopes to pioneer for the Oneworld Alliance of eight leading airlines.
Finnair already lets customers do wireless check-in, but "we can improve it," Ahola said. Other technology targets include the rollout of e-ticketing and enhanced Internet and wireless sales.
The airline aims to sell half its tickets via the Internet by 2006, something low cost airlines like easyJet already achieve. "We want to improve our Internet services [because they are service-driven and cost-driven," Ahola said.
The outsourcing services will be provided by a joint venture between IBM and Finnair. Finnair's IT employees, as well as the company's IT infrastructure, will be switched over to this new company in which IBM will have a 60% stake.
The technology-development centre will be a separate entity, but is also covered under the 10-year umbrella contract and should be operational in months.
Joseph Benaroya, general manager of IBM Europe's travel and transportation sector, said the deal "represents a significant departure from traditional IT outsourcing".
The contract requires the approval of the Finnish Competition Authority.
Last July IBM signed a similar outsourcing and technology development contract with Air Canada worth more than £600m over seven years.