The Dow Chemical Co. has awarded IBM a seven-year outsourcing contract to manage its IT infrastructure and to implement an Internet telephony system based on VOIP (Voice over Internet Protocol) technology, the companies announced jointly in a press release on Monday.
IBM competitor Electronic Data Systems (EDS) had been performing similar work under a contract that was terminated, an IBM official said in an interview. Although there is a significant overlap between the work EDS had been doing and the work IBM will do, IBM is also picking up some new tasks, said Todd Kirtley, general manager of the industrial sector for IBM Global Services.
An EDS official confirmed that, effective Sunday, the company and Dow terminated a contract they had signed in 2000. "I can confirm that EDS and Dow have terminated their IT services contract effective Aug. 1. The termination was on mutually acceptable terms," said EDS spokesman Kevin Lightfoot. He described the work EDS provided to Dow as "operational support of their existing IT systems and implementation of a new communications network."
The Dow-EDS contract, signed in December 2000, was valued at US$1.4 billion over seven years and its goal was "to revolutionize Dow's existing global communications infrastructure" with a system based on technology from Cisco Systems, according to a press release EDS issued at that time. Dow didn't immediately respond to a request for comment.
IBM and Dow aren't disclosing the value of their contract.
IBM will manage Dow's global IT infrastructure, including servers, storage, security, e-mail, disaster recovery and voice, data and video networking, Kirtley said. "It's a truly comprehensive, end-to-end IT infrastructure management agreement," he said. It includes the provision of e-mail service for more than 50,000 Dow employees and contractors.
The creation of the VoIP system is already under way and IBM will be picking up where EDS left off, Kirtley said. The Cisco technology will continue to be a key part of the system, he said.
Dow expects the outsourcing agreement to yield cost savings, improved service levels, operational flexibility and business innovation, according to Monday's press release.
IBM and Dow aren't strangers to one another. IBM has provided hardware, software and services to Dow over several decades, Kirtley said.
Dow, a provider of chemical, plastic and agricultural products and services, had revenue of US$33 billion in its 2003 fiscal year, ended Dec. 31, 2003. It has about 46,000 employees.