Sears axes outsourcing contract

Sears this week killed a US$1.6 billion outsourcing deal with Computer Sciences, saying CSC failed to perform "certain of its obligations."

Under the 10-year agreement, CSC was to provide Sears with IT infrastructure services to support the retailer's desktops, servers and systems as well as voice and data networks and Web sites. Sears retained responsibility for technology standards, architecture and service policies.

For its part, CSC said it "is convinced the termination for 'cause' is invalid, contrived to avoid or reduce termination fees of tens of millions of dollars, and a breach of the agreement for which Sears is liable for damages."

CSC also said it "believes it has demonstrated achievement of required services obligations in all material respects." In pending litigation in a federal court, CSC previously sought an injunction prohibiting Sears from terminating the agreement. That request was denied.

The failure of this contract is yet another example of how huge outsourcing deals may be a thing of the past, experts say . JPMorgan Chase killed off a US$5 billion outsourcing deal with IBM last year, though with less acrimony. JPMorgan's merger with Bank One led it to reconsider its IT strategy. The new firm has significantly greater capacity to manage its own technology infrastructure, and decided to bring its IT support staff back in-house.

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