Massive British Steel deal slips through Big Blue?s fingers

IBM?s outsourcing division was snubbed by British Steel last week after it failed to pick up one of the UK?s largest outsourcing deals ? worth an estimated #350 million.

The 10-year contract would have seen about 600 British Steel IT staff moving across to IBM, which has been in negotiations with British Steel since November last year. Initially, the agreement was planned to come into effect in February.

The decision by the steel giant to turn its back on Big Blue has left the way open for other outsourcing specialists, such as Cap Gemini and EDS, to handle functions such as sales support and database administration on its behalf.

A statement from British Steel said the talks had broken down because IBM was unable to meet basic objectives on how it would have managed specific parts of the project.

IBM kept quiet about the collapse of the deal and said: ?We and British Steel could not make an overall agreement.? It was thought that British Steel had asked IBM to guarantee it would use future-proof technology.

The proposed IBM/British Steel deal would have been one of the biggest outsourcing contracts in the UK and would have greatly assisted IBM?s ambitions to be a major outsourcing company. An estimated #1.7 billion is spent each year in outsourcing by the UK public and private sectors. The figure is expected to rise to about #4 billion by 2000.