Nokia signs 5-year IT outsourcing deal with IBM

IBM has won a five-year IT global outsourcing deal with Nokia, the world's largest mobile phone maker, the companies announced last Friday.

Under the terms of the contract, IBM will handle Nokia's IT Helpdesk operations as well as manage and develop the Espoo, Finland, company's desktop IT environment, according to Tapani Kaskinen, a spokesman for Nokia. The deal, which is subject to competition authorities' approval, is being valued at Euro 200 million (US$251.4 million).

"Certain services have been carried out by Nokia ourselves, but particularly with the IT Helpdesk, we thought that through outsourcing we could achieve cost efficiencies," Kaskinen said. "Also, we believe that we'll be able to benefit from IBM's latest technologies and services and that outsourcing will give us greater flexibility while allowing us to focus on our core competencies."

IBM, in Armonk, New York, beat a number of competitors for the contract including Hewlett-Packard Co. (HP) and Electronic Data Systems Corp., according to a source close to the negotiations.

"One of the main reasons we got this contract is because of our capabilities in human resources," said an IBM spokeswoman. As part of the agreement, about 430 people will join IBM from Nokia in 36 countries, she said.

The IBM services will be provided to Nokia employees in 57 countries, said Jens Boegh Nielsen, IBM's client solution executive, and the person charged with overseeing the day-to-day operations of the deal.

According to analyst estimates, Nokia currently employes between 55,000 to 57,000 people, based on the company's growth since April 2002 when it said it had 53,000 employees.

The services are geared towards the end-user environment and built around IBM's On Demand computing initiative, which also uses its Tivoli management software, Boegh Nielsen said. "The deal is structured around the consumption-based user model and is built on some of IBM's latest and most advanced technologies," he said.

Along with providing services for desktops, IBM will also offer services over PDAs (personal digital assistants) and wireless devices, Boegh Nielsen said. Hardware in not included in the deal, apart from the hardware required to run the Tivoli software, he said.

The first of IBM's services for Nokia are expected to begin in April, Kaskinen said.

The deal between Nokia and IBM is fairly standard within the industry and is similar to the five-year outsourcing deal Telefonaktiebolaget LM Ericsson signed with HP last June, said Andy Buss, a senior analyst with Canalys.com Ltd.

"Companies such as Nokia and Ericsson can reduce costs with such outsourcing agreements while also gaining robust supportive systems," Buss said. "The strength of both HP and IBM is that they both have a strong local presence in the Nordic countries -- which Scandinavian companies consider to be very important -- but are global players as well."

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