IBM Closes Major Outsourcing Deal With Visteon

IBM is taking over the operations of auto parts manufacturer Visteon.

By taking over operations, IBM is likely to bring more than $2 billion in outsourcing contracts over the next ten years. Details of the deal between Visteon and IBM were announced Wednesday and amount to one of IBM’s largest outsourcing contracts.

Visteon was spun off by Ford Motor Company back in 2000 and has been attempting to diversify away from dependence on the automaker. Through the deal, Visteon will now move away from using Ford’s computer system and shift to an outsourcing arrangement with IBM.

As part of the IBM-Visteon outsourcing contract, IBM will assume control over Visteon’s existing data centers and help desk systems. Some Visteon information technology professionals will be transferred to IBM, and significant layoffs are not expected.

IBM has decided that outsourcing is a major source of growth for the company, and it is marketing the company as one of the premier information technology outsourcing contractors in the world. Recently, IBM has won several multibillion dollar outsourcing contracts from major companies, including a deal with J.P. Morgan Chase estimated to be worth $5 billion over the next seven years.

By outsourcing IT management to IBM, Visteon is lowering its investment costs in technology, which enables it to focus on its core business. IBM has decided to make a major push in the outsourcing market for services and consulting. In 2002, IBM’s services divisions brought in more than $36 billion in revenue, or nearly half of the company’s total sales.

Visteon’s decision to go with IBM for its global services partnership will in its words “bolster its long-term growth and profitability.”

As part of the deal, IBM will provide a variety of IT services globally, including “mainframe support services, data centers, customer supports centers, applications development and maintenance, data network management, desktop support and disaster recovery.” Visteon provides technology solutions to the global automotive aftermarket and has more than 77,000 employees located in 25 countries around the world.

A recent survey published in late January by Dataquest, a unit of Gartner, said that offshore application management was ranked by 36 outsourcing vendors as the highest growth service opportunity in 2003.

The Dataquest outsourcing survey went onto say that by the end of 2002, IBM won seven of the fourteen major outsourcing deals. Computer Sciences Corp. won one and Electronic Data Systems won two major deals, falling far behind IBM’s dominance in the global outsourcing deal market.