IBM does deal in Brazil as outsourcing market remains fertile

IBM has landed a 10-year IT services contract with Brazil-based telecoms company Embratel, another sign the IT outsourcing market remains fertile.

Big Blue said on Tuesday it plans to work with the carrier to consolidate and manage all of its IT infrastructure, which is expected to save Embratel more than 30 per cent of its current IT costs. For its part, the carrier will provide telecommunications services to IBM and its customers under the deal.

"With the trend in [converging] technology among communications, IT and content, our customers will benefit from state of [the] art technology from both companies," Shamim Khan, a vice president of strategic affairs at Embratel, said in a statement.

Financial terms of the deal were not disclosed.

IT outsourcing deals, which involve a business farming out control of tasks such as applications development or tech support, have been seen as a bright spot for IT services providers. Gartner has forecast that the IT outsourcing market in North America will jump from $101bn in 2000 to $160bn in 2005. The market research firm has warned, though, that half of IT outsourcing projects will be considered unsuccessful in 2003 because they have not delivered the expected value.

IBM's services unit competes against companies such as Accenture, CSC and EDS.

For the Embratel deal, IBM said the IT infrastructure operations will include mainframe computers, a storage infrastructure of 110 terabytes and 27,000 pieces of additional equipment such as PCs, laptops and printers.

The agreement will cover 11,500 users throughout Embratel's facilities.

The Brazilian company offers telecom services such as voice, high-speed data transmission, internet and satellite data communications services.

Revenue in IBM's services wing grew 17 per cent year-over-year in the fourth quarter, to $10.6bn. IBM acquired consulting and technology services company PwC Consulting last year. For the Armonk, New York-based company as a whole, fourth quarter 2002 revenue from continuing operations reached $23.7bn, up 7 per cent year-over-year.

Ed Frauenheim writes for CNET News.com.