Sprint to save millions with IBM, EDS service contracts

Sprint expects to save US$150 million over five years on outsourcing contracts with IBM Global Services and Electronic Data Systems (EDS), with the two contractors developing and maintaining some software systems for the telecommunications company.

Some Sprint employees may eventually be laid off, said Alice O'Brien, spokeswoman for the company, but Sprint will attempt to retrain the affected employees or find them jobs with the contractors.

"Several hundred" Sprint employees will be affected by the outsourcing contracts, O'Brien said. Sprint anticipates a three- to 12-month transition as it determines what services IBM and EDS will provide. The contracts are for five years, but Sprint did not disclose how much money it is paying the two contractors.

Sprint has been communicating with the affected employees over the last three months, O'Brien said, and the company held meetings with those employees Monday before the announcement of the contracts. "We are taking it seriously, the impact it could have on employees," she added.

The contractors will take over some application development and software maintenance functions at Sprint, although the company's secure strategic software projects will stay in house, O'Brien said. Some of the services IBM and EDS will provide have yet to be determined, but an EDS spokesman said his company is planning to take over some of Sprint's primary applications development and management. An IBM spokeswoman said her company will focus on developing and modernizing Sprint's human resources, business intelligence and other corporate systems.

Sprint's decision was driven by the realization that the contractors could provide the services cheaper than Sprint could do them in house, O'Brien said. "We looked at some of the facts that were in front of us," she said. "We needed technology faster, technology that was better and at a cheaper cost."

IBM spokeswoman Kathleen Ryan noted that the Sprint contract is the third such contract IBM has signed with a telecommunications provider since mid-July. On July 16, IBM Global Services signed a deal with Qwest Communications International Inc., and that contract included database administration and data backup and recovery services. On July 21, IBM announced a deal with Telefonaktiebolaget LM Ericsson to develop and maintain the company's IT applications.

In the Sprint contract, IBM will help "clean up the older applications" and find new value in them, Ryan said.

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