Gap signs US$1.1B outsourcing deal with IBM

Gap has signed a 10-year, US$1.1 billion IT outsourcing deal with IBM, the San Francisco-based clothing retailer said in a Securities and Exchange Commission filing Tuesday.

The Gap, which operates more than 3,000 stores, hired IBM to streamline its IT operations and reduce costs. The move will include transferring approximately 400 Gap employees to IBM's payroll, according to the filing. As part of the deal, IBM will support data center, server and network outsourcing for Gap.

The estimated cost for the outsourcing deal is approximate because some of the pricing will be based on actual consumption of IT services. As part of the agreement, Gap included a provision to keep its costs down while ensuring that charges don't become "significantly higher" than the market rate for these services.

To accomplish that, agreement allows gap officials "to periodically perform benchmark studies ... to determine whether IBM's price for the services is consistent with the then-current market standards."

Neither IBM nor Gap officials were immediately available for comment Tuesday morning.

Earlier this month, Gap reported net sales of US$15.1 billion for the 48 weeks that ended Dec. 31, down 2 percent compared with net sales of US$15.4 billion for the same period a year earlier. Gap operates the Banana Republic and Old Navy retail stores, among other stores.

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