American Express, IBM in $4 Billion IT Services Pact

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American Express has signed a $4 billion, seven-year technology services deal with IBM, handing over to Big Blue the responsibility of managing more than a billion daily transactions and most of the financial-service giant’s global IT operations.

American Express, whose far-reaching operations include charge cards, investment services, insurance and travel agencies, says the deal will help it save hundreds of millions of dollars in IT costs over the next seven years.

According to the companies, effective March 1 IBM will provide American Express with “utility-like access to its vast computing resources,” promising to improve the quality, performance and delivery of Amex technology systems.

As part of the switch, approximately 2,000 American Express technology staffers in the U.S. and overseas will allowed to transfer to comparable positions at IBM, with the U.S. transfers beginning in March and the international transfers beginning in May. It was unclear what percentage of Amex’s IT staff that represents.

The deal also represents one of the largest IT outsourcing deals to date, and is a strong sign that large enterprises are taking seriously handing over costly operations to other providers who are responsible for managing IT services as demand for them grows or shrinks.

In this case, IBM will oversee American Express’s worldwide computer systems and Web sites, providing skills and computing resources on a proactive and “on-demand” basis. IBM will provide data center and computer services from Amex facilities in Phoenix and Minneapolis and will deliver technical support services on-site at Amex facilities worldwide.

American Express will retain the core parts of its technology operations, including IT strategy, strategic technology relationships, the development and maintenance of applications and databases and the management of its technology portfolios.

The deal is a major win for IBM and its services business; American Express has one of the largest IT infrastructures in the world. In addition to cutting IT costs by hundreds of millions of dollars, American Express officials say that partnering with IBM, with its varied and vast technology resources, “will provide (the company) with the flexibility to adjust rapidly to changing business needs.”

“Our goal in this partnership is to ensure that American Express is the world’s best user of information technology,” said Glen Salow, executive vice president and chief information officer for American Express. “In technology operations, that means computing resources are available on demand at a predictable, best-in-class cost and are delivered with the highest levels of quality. IBM has the unique combination of skills, processes and economies of scale to meet these requirements and ensure our IT systems foster business growth.”

“Today American Express is placing itself at the forefront of a new computer services paradigm,” said Doug Elix, senior vice president and group executive of IBM’s Global Services. “The utility computing service delivery model American Express is adopting will give it the flexibility to draw on all the computing resources, skills and technologies required to support future growth.”