IBM roars off with £98m Hertz outsourcing contract

Hertz, the world's largest car rental organisation, has handed IBM an early extension to the IT outsourcing deal the companies...

Hertz, the world's largest car rental organisation, has handed IBM an early extension to the IT outsourcing deal the companies agreed in 1993.

Hertz will pay IBM £98m over six years to provide worldwide IT services. The contract extension was signed a year before the existing contract was set to expire.

IBM manages mainframes at Hertz's data centre and provides application development and application management for Hertz's claims management and equipment rental units, said Claude Burgess, vice-president of technology and e-business at Hertz. IBM also provides disaster recovery services to Hertz.

Under the new contract, IBM employees in India will do some application management and development work. In the past it was all done in the US, said Burgess.

The long and substantial outsourcing relationship with IBM is a rarity for Hertz, a company that, according to Burgess, manages most of its IT tasks internally.

The core outsourcing agreement has led to separate consulting engagements for IBM.

"We do a lot of one-off projects and we use IBM as consultant," said Burgess. "If we're going to look at something new or different, IBM is certainly one of the first people we look to for advice and assistance. We have used IBM for significant projects in the past, outside of the outsourcing agreement."

Hertz tapped IBM recently to evaluate how the system it uses to provide quotes for car and heavy equipment rentals could be improved so that quotes can be provided faster and more efficiently.

Extending outsourcing agreements beyond the provision of services and into the realm of improving business processes for the client is something IBM is focused on doing more often, Buddy Meyers, IBM's head of travel and transport consulting arm.

A recent example of a new type of broader outsourcing agreement, Meyer said, is the one IBM signed with Finnish airline Finnair in June, which in addition to the provision of IT services also calls for the creation of a jointly operated technology development centre at which IBM and Finnair will develop Internet-based airline services.

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