IBM bags £160m 'on demand' outsourcing deal

The Swedish postal service, Posten, aims to cuts its IT spend by 20% through a six-year, €220m (£160m) "on demand" IT services...

The Swedish postal service, Posten, aims to cuts its IT spend by 20% through a six-year, €220m (£160m) "on demand" IT services outsourcing deal with IBM. 

Pricing is based on the number of servers and applications Posten uses. If the number of servers and applications it uses drops it will pay IBM less.

Posten’s chief information officer Mats Engstrand said this was critical to its decision to outsource as the organisation foresees a reduction in its business and a consolidation in its IT infrastructure.

“We don’t regard IT as a core focus and we see clear and significant savings in outsourcing our IT infrastructure,” said Engstrand. “We expect to save in the region of 15-20% of our ongoing IT costs.”

IBM will manage Posten's IT and telephony infrastructure, including its three datacentres, provide enterprise computer management and helpdesks and oversee the telephony network, including call centres and mobile phones.

Posten has around 600 existing servers running 200 applications in 13 locations in Sweden.

The move follows the recent on demand deal IBM signed with Electrolux to manage its desktops and local area networks. Electrolux is paying IBM on a per-user basis. 

John Mackie, a senior consultant at Morgan Chambers, said IBM is leading the way in on demand outsourcing. “They have the scale to do this better than others,” he said.

However, Mackie warned that IBM is making “some pretty bold claims” in its on demand deals on the back of its projected growth plans. Clients need to ensure they are protected if that growth fails to materialise, he said.

“It could stop the client getting the benefits they anticipated,” said Mackie. “You need to ensure that governance is in place so it remains a good deal regardless of what happens in the market.”

Although on demand deals can save clients money per unit, users could end up paying more of they overestimate how many units they need, Mackie added.

Engstrand acknowledged that Posten was worried about paying more for its IT by outsourcing.

“To some extent this was a concern of ours but we believe we’ve been quite careful and done our homework,” Engstrand said. “In the end we felt the IBM deal was the most attractive.”  

180 Posten staff will transfer to IBM as part of the deal, which also extends an existing PC and networks contract by three years.

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