Nortel inks $US3B outsourcing deal with CSC

Canadian telecommunications equipment giant Nortel Networks Corp. announced today that it has signed a seven-year, $US3 billion outsourcing agreement with Computer Sciences Corp. (CSC) to manage the bulk of its internal IT operations.

Under the agreement, El Segundo, Calif.-based CSC will provide back-office information technology support, help desk, data center management, legacy application development and support for more than 75,000 desktops worldwide to Nortel's employees. On Oct. 1 Nortel Networks employees will begin working for CSC's professional services team.

In a statement it released today, Brampton, Ontario-based Nortel said the outsourcing arrangement would allow the company to focus on developing its Internet business. Last week, the company announced its plans to purchase Web-switching technology firm Alteon Websystems Inc. in San Jose for $US7.8 billion in stock.

Though some analysts have questioned the long-term outlook for traditional outsourcing companies that face stiff competition from smaller Internet services firms, Nortel's deal with CSC signals that many big companies are reticent about hooking up with a start-up for long-term outsourcing deals, according to Joshua Randall, an analyst at Kennedy Information Research Group in Fitzwilliam, N.H. "Smaller e-services firms don't have the capabilities to run a seven-year deal, but [they have] more capabilities to do front-end e-business work," he said.

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