IBM Global Services will send 450 local jobs to India in order to keep alive its applications development and maintenance development contract with Telstra after the telco’s blunt ultimatum to IT vendors to sharpen prices, improve service or get out.
Announcing the move as an 18-month extension to the existing 10-year application development and maintenance services deal originally struck in 1997, Telstra is spruiking the new extension as being worth potentially hundreds of millions of dollars for IBM. However, it refused to disclose any specific numbers citing commercial confidentiality.
“Beyond the guidance in [the official press release], I can’t give you anything more," Telstra spokesperson,Stephen Morrison, said. "The precise amount is confidential. That’s the ball park that we are in.”
Morrison also refused to break down what proportion of the “potential” nine-digit figure would be earned under the new contract extension, versus those revenues already earned or forecasted for in the original deal. Sources closer to the deal suggested that the amount was more likely to reflect applications expenditure “as a whole”, or over 11.5 years, rather than for the extension itself.
The new application services deal will run until December 2008. However, job cuts are expected to happen almost immediately as IBM scrambles to find other work for as many displaced code cutters as possible.
Many of the employees in the firing line to be cut are understood to have originally been Telstra IT staff who migrated over to Big Blue in the cause of outsourcing seven years ago.
In August 2003, Telstra CIO, Jeff Smith, told an analyst and media briefing on Next Generation Cost Reduction that the telco was more likely to take on IT staff than lose them as it wrestled back control of its architecture as part of its efforts to slice nearly a billion dollars off its IT bottom line.
A Telstra press release on the extended deal quotes Smith as saying that its "sourcing agenda was driven by the need for world-class delivery of IT services and increased competitive pressures in Australia and internationally".
"We have called on our key IT providers to deliver improved cycle times, quality and cost effectiveness in the delivery of application development and maintenance services," Smith said.
IBM Global Services spokesperson, Caspian Smith, said the 450 roles, to be redeployed to IBM India, would perform “programming, application design and most of the testing and deployment of the solution”, while IBM’s local operations would "manage the overall solution including client relationship management, business analysis, project management, solution architecture and coordinating the testing and integration”.
“We will be delivering this work partly from our local operations and partly from our Indian operation [IBM India]”, Smith said.
IBM’s Smith said that while 450 “roles” were being redeployed, an exact figure on local job losses was more difficult as the company would try to do everything it could to find new roles for those displaced and absorb the cuts through natural attrition.
“We will do absolutely everything we can to find new roles for those people," Smith said. "We will be offering training and upskilling.”