Qwest hands IBM outsourcing contract

Qwest Communications International has awarded IBM an outsourcing contract whose value a financial analyst estimated at up to $2 billion over 10 years.

Although Qwest and IBM are opting not to disclose the deal’s terms, SoundView Technology Group analyst Michael Bowen said in a research note Wednesday that the companies signed a 10-year contract valued at between $1.8 billion and $2 billion.

Qwest is outsourcing general IT tasks which are common to large companies, including management of mainframe and mid-range servers, administration of databases, handling of electronic messaging systems and provision of back-up and recovery services, Kate Varden, a Qwest spokeswoman, said Wednesday. The contract takes effect immediately, she said.

Qwest expects the deal to generate savings and to allow it to improve its customer service, Varden said.

About 600 Qwest IT employees in the U.S. will be offered jobs with IBM, including 280 at Qwest’s headquarters in Denver, Colo., Varden said. The affected Qwest employees represent under 10 percent of the company’s total IT workforce, she said.

Qwest outsources other IT tasks to other IT service providers, mostly on a project or an as-needed basis, but handles the bulk of its work in-house, she said. Of the IT work that Qwest does outsource, this engagement with IBM is significant because it is a more formal, structured and long-term agreement than Qwest’s average outsourcing engagement, she said.

Qwest is not outsourcing to IBM any “proprietary” or sensitive IT tasks related to competitive or customer operations, she said.

The outsourcing deal affects Qwest operations in the U.S. only, which is where the company generates most of its revenue and where most of its operations are located, Varden said. Qwest is a telecommunications service provider with 50,000 employees and 25 million residential and business customers. Its portfolio includes local, long-distance and data services.

Neither company put out a press release on the deal. Qwest announced it internally to its employees on Tuesday.