IBM Lands Major Outsourcing Deal with Telstra
IBM Lands Major Outsourcing Deal with Telstra
December 12, 2007: In an enormous outsourcing deal, IBM has announced a seven year deal with Telstra to absorb the entirety of its logistics operation.
IBM has actually been responsible for Telstra’s logistics since September of last year, with the new seven year deal being an extension of this initial contract and a major coup for Big Blue.
“This is a substantial deal for IBM, and represents a significant deepening of its outsourcing relationship with one of its global top five clients. The extension of the contract without any attempt to go through a further competitive tendering process is an expression of faith by Telstra in IBM's capacity to deliver following their observations of phase one over the past year.” said Steve Hodgkinson, Analyst at Ovum.
Hodgkinson believes that the deal is a further step towards Telstra chief executive Sol Trujilo’s plan to re-engineer Telstra’s core business and cut as many as 12,000 jobs along the way.
The outsourcing deal has so far seen a cost saving of $500 million since IBM took over, with a further $200 million in cost savings expected to come in early 2008. According to Hodgkinson these savings stem from process simplification and consolidation, which leads to headcount reductions.
“The deal has provided IBM with an excellent opportunity to leverage both its own global supply chain expertise and its widespread geographic footprint across Australia - in many ways IBM and Telstra have similar logistics challenges in this market.” said Hodgkinson.
Should this deal continue its strong road of success, it’s likely that it will provide the framework for IBM to land other major clients, particularly if it continues to deliver on its major savings targets.
“If IBM does secure other telecoms clients into this model it will be interesting to observe the extent to which it can deploy its own globally integrated enterprise capabilities to the benefit of predominantly nationally bounded telecoms organisations.” said Hodgkinson.