IBM, Cendant Ink $1.4 Billion Pact

Ten-year pact calls for IBM Global Services to take over data operations and help desk support for most of the travel company's 40-plus business units.

IBM Global Services inked a pact with Cendant Corp. to take over data operations and help desk support for most of the travel companys 40-plus business units.

The 10-year pact, valued at about $1.4 billion, calls for IBM to consolidate data centers; manage 13 MIPS worth of mainframes and servers; provide help desk support for Cendants Avis, Wizcom and real estate businesses; and provide desktop support services for Cendants corporate offices as well as many remote locations. IBM will manage 1,400 Cendant servers and host Web sites and interactive services for several of Cendants brands.

Cendant chose to outsource those operations to allow it to focus on its "core competency," according to Sean Ryan, general manager, distribution sector, for IBM in Somers, N.Y.

But like most outsourcing decisions made during economic decline, Cendant was also looking to lower costs.

"The theory is they can provide lower-cost services to us," said Tom Christopoul, chief administrative officer at Cendant in New York. "But system availability, uptime, redundancy—those are important considerations. IBM does this work very well," he added.

At the same time, Cendant can also "focus on more value-added IT activities" such as e-commerce, he said.

About 500 Cendant employees will move over to IBM Global Services as part of the contract.

Cendant, a travel and residential real estate services firm with 107 locations and 60,000 employees, awarded the contract to IBM Global Services over competitors thanks in large part to an existing relationship between the two firms.

"Theyre a large customer of ours, and were a large customer of theirs. A lot of the existing infrastructure is IBM [based], and they had good knowledge of our operations," said Chistopoul. "They convinced us their level of service and competitiveness was more compelling than their competitors," he added. Although he declined to name the other competitors in the running, he said only a handful have the kind of scale necessary for the task.

Among Cendants 40-plus business units are Avis Rent-a-Car; Ramada, Days Inn, Motel 8 and Howard Johnson Hotel chains; and vacation travel companies such as Resort Condominiums International (RCI) and Fairfield Properties. IBM Global Services will provide data operations management for those units as well as Cendants Coldwell Banker, Century 21 and Cendant Mobility units.

The deal also covers Cendants Galileo International, which provides an electronic global distribution system connecting travel agencies, airlines, hotels, rental car companies and others.

The roughly 500 employees are expected to transition to IBM Global Services by spring. IBM will consolidate Cendants Garden City, N.J., data center into its Denver data center.

IBM maintains a strong presence in the travel industry, according to Ryan. Earlier this year, IBM Global Services inked a 10-year, $664 million deal with Japan Airlines and a seven-year, $908 million outsourcing pact with Air Canada.