IBM in $1.4 bn deal with real estate firm

NEW YORK: Leading computer company International Business Machines Corp. and

travel and real estate firm Cendant Corp. on Monday said they signed a 10-year,

$1.4 billion technology services agreement.

As part of the agreement, New York-based Cendant, which is known for its Avis

Rental Cars and Ramada hotels brands, will transfer 500 technology employees to

IBM, the companies said. Such transfers are typical when a company takes over a

large technology operation.

Armonk, New York-based IBM will manage Cendant's data center in Denver,

Colorado, including its mainframes and large computer servers, as well as

transactions processing. IBM will also operate a support desk for thousands of

the company's employees and perform Web hosting.

Cendant said it will continue to run the vast majority of its technology

operations in-house, keeping about 2,500 technology employees who work largely

on applications development, computer networks and Internet architecture.

Cendant has about 60,000 employees in total.

New York-based Cendant operates airline, car rental, hotel and leisure

companies, and Galileo International, a global distribution system used for

reservations. The deal includes Cendant's real estate units, such as Coldwell

Banker and Century 21.

Cendant Chief Administrative Officer Tom Christopoul said he expects to save

several hundred million dollars during the 10-year period by moving its more

commodity-based technology to IBM.

Companies typically turn to information technology services companies like

IBM, or its competitors EDS Corp. and Computer Sciences Corp., to manage

technology operations to cut costs during economic downturns. Services has

become an increasingly large part of IBM's revenues in recent years and in the

third quarter accounted for more than 40 percent of IBM's sales.

But not everything can be done by an outside firm, Christopoul said.

"When it comes to things like Internet, site development, applications

and software development, so much of what we do relative to the customers we

serve is so specific in nature and so proprietary in some cases that to

outsource that would not be a good long-term strategic move," Christopoul

said.

(C) Reuters Limited.