IBM, Dell strengthen ties with $US6B services deal

Dell Computer and IBM on Monday took the next step in the companies' increasingly tight relationship, announcing that IBM would become a provider of services to Dell customers in a deal worth $US6 billion.

Starting early next year, Dell will begin offering corporate, government, and education customers a "range of installation and on-site warranty services" from IBM for notebooks, workstation, desktops, servers, and data storage products, company officials said Monday morning. The deal will extend to international markets beginning in 2000.

According to Ro Parra, senior vice president at Dell, the direct marketer of PCs needed to expand its services offerings as the company grew into the enterprise market.

"It became more and more of an obvious move to make," says Parra, here Monday. Previously, Dell had strategic services arrangements with only Wang and Unisys. But with the advent of the IBM partnership, Dell may have more aggressive plans.

"It is not inconceivable that we would be able to get a large account and customise the services to that account [through IBM Global Services]," said Parra, who also anticipates Dell sales representatives and IBM Global Services representatives will jointly pitch for large accounts. As for IBM's PC business competing with Dell, it will remain business as usual.

"The IBM sales force will continue to compete with Dell voraciously," says Mike Daniels, general manager of product support services at IBM Global Services. "Dell and IBM have a mature understanding of the marketplace. Our customers have multivendor accounts."

The deal is an extension of the $16 billion technology deal announced last March in which IBM would provide Dell with components and technology. At the time, many experts speculated that IBM would eventually leverage Dell's PC manufacturing efficiencies and Dell would rely on IBM's Global Services arm, though neither company would confirm that.

IBM lost more than $1 billion last year on its PC business.

IBM officials would not comment on when the other shoe might drop.

"IBM has stated a direct strategy in selling PCs," said Daniels. "This deal is entirely different to that."

With the agreement, Dell has given its customers access to 22,000 additional services technicians worldwide. Officials from both companies said that they expect the partnership to expand over time.

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