IBM beats HP for infrastructure deal with Nestlé

IBM Corp. will provide the world's largest food corporation, Nestlé SA, with servers and other hardware as well as software in a five-year deal valued at US$500 million, the companies said Thursday.

IBM has been contracted to build five data centers for Nestlé complete with servers, storage systems and database software, the company said in a statement. The centers will be located in Phoenix, Sydney, Frankfurt, Germany, and Bussigny, Switzerland, with two in Bussigny -- one focusing on company consolidation and the other on development, IBM said.

The move comes at the expense of Hewlett-Packard Co. (HP), which had been the IT provider for Nestlé. HP has contended that its proposed acquisition of Compaq Computer Corp. would allow it to compete effectively against IBM in such areas as the high-end Unix and IT services markets.

"We will not comment on who we worked with in the past, but I can say that we chose IBM because we found it to be the best value for money and the best fit for our overall global cost reduction program," said Nestlé spokesman François Perrou.

HP acknowledged that it was disappointed by its failure to secure the Nestlé contract, but that Nestlé remained one of its top global accounts, HP spokeswoman Alison Koster said in e-mail Friday. HP declined to outline the details of that relationship other than to say HP "will support (Nestlé) with a fully dedicated team, serving their multiple and evolving needs," Koster said.

IBM will supply the Vevey, Switzerland-based food giant with IBM eServers, including pSeries Unix-based servers and xSeries servers, which use semiconductors from Intel Corp.; enterprise storage servers (also known as the Shark Enterprise Storage System); storage area networks; DB2 database software; and software from IBM's Tivoli unit, IBM said.

"Nestlé considers information on who it contracted with before IBM to be proprietary, but it's safe to say that they looked at all of the major players before deciding on IBM. Along with our price points, we are able to offer a strong eServer product," said IBM spokesman Greg Thompson.

As part of the deal with IBM, Nestlé will implement mySAP.com from the German business software maker SAP AG and will manage the data centers itself. Nestlé is already one of SAP's largest customers, and had previously run its ERP (enterprise resource planning) software in conjunction with HP products such as its HP Output Management System (HP OMS).

Nestlé expects that its plans to consolidate and standardize its business processes will save the company $1.8 billion by 2006, Perrou said.

"I think that it has not been stressed enough that our agreement with IBM is just a small part of our global reorganization effort which is very, very ongoing. (The agreement with IBM) is all in the context of this global project. We are not going to revolutionize the whole system to fit a particular trend," Perrou said.

Nestlé is looking to perform all of its processes more efficiently, and that includes IT. For example, the company will be reducing its IT sites from over 100 to the five data centers it is building with IBM, Perrou said.

Thompson pointed out that while IBM will provide some services to Nestlé in terms of getting the data centers up and running, Nestlé has decided to keep its IT management in-house.

More commonly with its large contracts, IBM manages the IT operations infrastructure of its customer, as with its $4 billion, seven-year-deal with American Express Co. announced earlier this month.

"Some companies choose to do outsourcing and some choose to manage things themselves. Nestlé is one of those companies that has chosen not to outsource, and though we are offering end-to-end services in terms of (providing and installing) the hardware and software for the centers, the services play a rather small part of the contract," Thompson said.

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