Qantas launches billion dollars' worth of outsourcing

Qantas has announced multi-year information technology outsourcing deals worth AU$1.4 billion with Telstra and IBM Global Services.
Written by ZDNET Editors, Contributor
Qantas has announced multi-year information technology outsourcing deals worth AU$1.4 billion with Telstra and IBM Global Services.

The airline told the Australian Stock Exchange today it had closed an AU$750 million, seven-year deal with Telstra that encompassed management of its voice, desktop and network services, as well as a 10-year, AU$650 million deal with IBM that covered data centre, applications services, mainframe and cross-functional services.

Under the Telstra deal, the telecommunications heavyweight will maintain responsibility for management of desktops and wide-area networks, as well as upgrading of the current network to Internet Protocol.

Telstra will also manage Qantas' voice services for Australia and New Zealand, enhancement of desktops including upgrades to software, mail and directory environments.

Telstra lauded the deal, saying it was one of a number of milestones for its services solutions group."We are now ideally placed to grow its share of the AU$10 billion Australian ICT services market," Telstra Services Solutions managing director Mike Foster said.

Qantas chief information officer Fiona Balfour said the existing infrastructure and facilities of Qantas could no longer meet the company's growing IT needs. Qantas has also said that the airline staff affected have accepted positions with the service providers or been redeployed within the company.

IBM Global Services Australia and New Zealand general manager Brendon Riley said there were two parts to IBM's agreement with Qantas.

Firstly, IBM will migrate Qantas's servers to a shared infrastructure at an IBM data centre in Sydney, which will enable Qantas to access processing power and storage capacity on an on-demand basis. Using a variable pricing model, Qantas will pay only for the computing power it uses, which has the potential to reduce the airline's IT costs significantly.

Secondly, IBM Global Services will also manage a range of services, including service desk support, security and change management, across all of Qantas' IT providers. Centralising these services will reduce administration time and other costs for Qantas.

Riley said "the services arrangement with IBM will give Qantas the ability to quickly scale its infrastructure and staff resources so it can respond more rapidly to customer demands and growth opportunities."

Telstra is expecting a 43 percent increase in revenue for the first year of its deal with Qantas. As of today, only 10 Qantas employees have moved to Telstra, 66 are moving to IBM while 22 are staying in Qantas. The rest will be retrenched.

Qantas said they will retain their internal IT organisation to work on application support and management for security policy among others. They also added that as of the moment, it is hard to determine the exact cost reduction in terms of dollar savings since they are moving into a new pricing model.

The transition of systems is expected to begin by the end of this month and will be completed in two years. For the last couple of years, Qantas has tapped Telstra to handle its domestic communications network and desktop services, and IBM and Oracle for its business e-enablement.

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