IBM, Amex Ink $4 Billion Outsourcing Deal
American Express Co. said it will outsource its data centers and other IT operations worldwide to IBM Global Services in a deal valued at $4 billion over seven years.American Express Co. said it will outsource its data centers and other IT operations worldwide to IBM Global Services in a deal valued at $4 billion over seven years. American Express becomes the first large enterprise to sign on for what IGS for the last 14 months has been promoting, first as e-sourcing and, more recently, as e-business on demand. Unlike traditional outsourcing in which providers such as IGS, Electronic Data Systems Corp. and others assume control of an enterprise customers data centers and operate them, typically under a long-term fixed contract, the e-sourcing model calls for enterprises to purchase server cycles, storage and other IT services on an as-needed basis from a shared infrastructure utility operated by a provider such as IGS. IBM CEO Louis Gerstner just over a year ago said IBM planned to invest $4 billion to build 50 new data centers and to develop new technologies to support e-business on demand. The pay-as-you-go nature of the IGS offering was one of the key selling points for American Express, according to Glen Salow, executive vice president and CIO at American Express in New York. As the company adds new types of financial services productsmany targeted toward consumersits been difficult to predict the demand on IT resources. "We began to wonder if we could scale up and down fast enough," said Salow. "We came up with the hypothesis that, while we [in IT] were good at what we did, if we could leverage someone who was great and had IT operations at the core of their business, wed have greater flexibility."
Salow said American Express also expects to reduce operating expenses as a result of the outsourcing deal. He declined to specify expected savings, however.