Nissan outsources US IT to IBM in $US1b deal

Nissan North America has outsourced its entire IT operation to IBM Global Services in a nine and a half-year, $US1 billion deal designed to help Nissan cut costs and streamline its IT operations, company officials said in a statement.

"It's a way for us to increase efficiency, become more competitive and be more effective in the information systems area," said Terry Hernandez, a Nissan spokeswoman.

Two-thirds of Nissan's 350-person IT staff has been hired by IBM, according to Hernandez. The rest have stayed with Nissan in other departments.

The move is part of Nissan's "Revival Plan" to develop its core business and reduce costs, announced by chief operating officer Carlos Ghosn. The company plans to cut 21,000 jobs worldwide, reduce expenses by $9.1 billion and grow market share and profits within five years. Nissan has been losing global market share continuously since 1991 and now claims 4.9 per cent of auto sales, down from 6.6 per cent in 1991. Nissan also has suffered losses in profitability in seven of the last eight years.

"It's much better in their cash flow to outsource this to IBM than to carry a large IT structure along with them while they're trying to restructure," said Kevin Prouty, auto analyst at AMR Research.

"They're probably being overly optimistic that $1 billion will translate into a $1 billion [or more in savings], but from a cash-flow standpoint it will help them significantly," he said.

Though Nissan's revival plan is new, plans to outsource IT operations have been in the works for months. The outsourcing transition is scheduled to begin immediately.

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