IBM nicks $1.4bn IT deal from EDS

IBM will take over the $1.4bn Dow Chemical IT outsourcing contract that rival EDS paid $135m to get out of because of losses it was making on the deal.

silicon.com revealed last week that the contract in question was Dow Chemical after EDS buried a one-line announcement in its earnings report that it had reached an amicable agreement to terminate an unnamed "commercial contract".

EDS signed the $1.4bn seven-year contract with Dow in 2000 to provide an "intelligent network foundation" for the global chemical company. The financial terms of the IBM contract have not been disclosed.

IBM Global Services will now pick up the deal to manage Dow's worldwide IT infrastructure, including support for local area networks, wide area networks, voice and video. Additionally, IBM will provide email for 50,000 Dow workers, support for 2,800 servers, security management and disaster recovery.

The official contractual handover takes place this week, although Dow, EDS and IBM will work together on the transition over the next few months. IBM will first undertake a complete review of Dow's IT infrastructure to look for ways to consolidate systems and improve efficiency.

silicon.com understands that EDS is likely to get a shot at some forthcoming BPO work at Dow as a result of the amicable settlement.

Anthony Miller, analyst at Ovum Holway, said that IBM is taking over the Dow contract with a notional $700m of revenue still to go, although Dow is likely to have negotiated "more for less" for the remainder of the deal.

"Nonetheless, 'revenge is sweet' for IBM, which has had a decades-long relationship with Dow and must have been pretty peeved when EDS won the deal originally. And good news for EDS too in a way, as it's another albatross lifted from around its neck."